Maxis, Apollo's Reddy buy Aircel for $1 bn

Maxis will control 74% of Aircel, while Reddy family will hold the rest.

Maxis Communications Bhd, Malaysia's biggest mobile phone company, and the Reddy family, which runs the country's biggest health care company, Apollo Hospitals Enterprises, will buy Chennai-based mobile firm Aircel for $1.08 billion.

Maxis will control 74 per cent of Aircel, the maximum overseas investment India allows in telephone companies, while the Reddy family will have the remaining shareholding.

The transaction will be executed in two stages. The first stage will see a subscription for new equity shares representing 26 per cent of the expanded capital of Aircel. The second stage will see the purchase of all existing equity shares held by promoter C Sivashankaran.

Sivashankaran holds his stake through a holding company "" Aircel Televentures Ltd. The second transaction will be subject to approvals from shareholders and regulators of both Malaysia and India. On completion of the proposed acquisition, Maxis will hold 65 per cent in Aircel directly.

A special purpose vehicle, to be formed jointly with the Reddy family, will hold the remaining 35 per cent. The SPV will be formed in a ratio that will give Maxis an overall equity interest of 74 per cent in Aircel.

Maxis and the SPV will jointly invest $1.08 billion, of which $280 million will be injected into the company in cash. This implies a pre-money equity valuation of $800 million for Aircel. Maxis, which will use cash and debt to pay for the acquisition, expects to conclude the purchase by April next year.

The acquisition, Maxis' second overseas investment and the biggest by a Malaysian company in India, reflects its strategy to expand overseas because of rising competition at home, where a price war has cut profits in the past two quarters.

Aircel gives Maxis access to a market where less than 10 per cent of the nation's 1.1 billion people own a mobile phone, compared with about 60 per cent in Malaysia. It is the second largest foreign direct investment in telecom. The largest was Vodafone's acquisition of a 10 per cent stake in Bharti Tele-Ventures.

Aircel is one of the leading mobile operators in Tamil Nadu and had 2.2 million subscribers in October 2005. It has presence in over 12 circles, and the acquisition will enable the company to target 628 million people or 58 per cent of India's total population.

According to Maxis Chairman Tan Sri Dato' Megat Zaharuddin, "India is one of the largest economies and one of the fastest growing in the world with an expected growth rate of 6-7 per cent per year in the medium-term. While the mobile penetration rate is currently low at 6.2 per cent, the Indian mobile market is also amongst the fastest growing and the number of subscribers is expected to grow between two and three times from the current 67 million."

With investments in both India and Indonesia, Maxis had the opportunity to build strong footholds in two of the world's most attractive high-growth, low-mobile penetration markets while diversifying its market base, he said.

Commenting on this acquisition, Aircel's Director V Srinivasan said, "Aircel has taken rapid strides from being a single-circle operator to spreading its wings across various geographies in northern and eastern India. Aircel is proud to have created a strong platform of performance and profitability that will help realise Maxis' vision of entering the Indian market and becoming a leader in the Indian telecom space."