Two more telcos await to ring the IPO bell

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Five years after the largest GSM operator Bharti listed on the bourses, two more telecommunication firms are gearing up for the plunge. A V Birla group's Idea Cellular and Spice Telecom will go public early next year. The two IPOs are likely to come out within a gap of four to five weeks, flooding the market with much-needed telecom paper, reports The Economic Times.

While Birlas are looking at mopping up around Rs 2,500 crore from the IPO, Spice will see BK Modi and Telekom Malaysia offloading 20% equity. Idea filed the red herring prospectus, RHP with Sebi on December 7, while Spice is likely to do the same by the end of this month or early January.

"Spice has received the approval from foreign investment promotion board, FIPB regarding FDI in the company. It is likely to file the RHP before the first week of January," sources said.

Telekom Malaysia holds 49% in Spice, which offers cellular services in Punjab and Karnataka.

As per the RHP, Idea's issue size is Rs 2,500 crore with a 15% green-shoe option. These IPOs are expected to receive a warm response from investors considering the sustained growth in telecom subscriber base over the past few years. "While the telecom sector has grown by leaps and bounds since Bharti was listed in 2002, there has been no IPO since then. The two public offers will be lapped up by investors waiting for telecom shares," said an analyst.

Bharti Airtel, then Bharti TeleVentures, had come out with India's first fully book-built Rs 833-crore IPO, which was oversubscribed by over 2.5 times at a time when the number of mobile users in the country was just over 5 million. Today, India is adding over 6 million users every month.

"The fast subscriber growth in India, low teledensity and increasing saturation in international markets are ensuring that the bull run in telecom continues. The sector is sure to remain hot for the next few years. While capex of operators is an area of concern, the growth will ensure that returns make up for it," said an analyst.

Reliance Communications was listed on March 6 this year after demerger with Reliance Industries. Though it was not a listing through the IPO route, Rel Comm became the turnover topper on NSE as well as BSE on its debut and earned a market value of over Rs 35,000 crore.

On Friday, Bharti had a market cap of Rs 1,15,800 crore, while for Rel Comm it was Rs 91,500 crore and Rs 8,400 crore for MTNL .