Idea Cellular to rationalize its corporate structure by merging eight subsidiaries

In a move to rationalise the corporate structure and improve the consolidated balance sheet of Idea Cellular, Idea Cellular will merge its eight subsidiaries with the company during the current quarter. The A V Birla Group company has filed applications for amalgamation of subsidiaries with respective High Courts within whose jurisdiction the registered office of these entities are located. Since Idea has grown through the inorganic route as well, it acquired companies in some circles while expanding operations. In 2001, Idea acquired RPG Cellular, which was offering services in Madhya Pradesh. Subsequently in 2004, it bought Escotel, which was the incumbent operator in Haryana, Uttar Pradesh (West) and Kerala. It was later renamed Idea Mobile Communications. The licenses for Uttar Pradesh (East), Rajasthan and Himachal Pradesh were issued to Idea Telecommunications, which began operations in these circles last year.

Idea’s other subsidiaries are BTA Cellcom, Sapte Investments, Vsapte Investments, Bhagalaxmi Investments and Asian Telephone Services. The last four are investment companies and special purpose vehicles, each holding 25% stake in BTA Cellcom. The revenues from all of these are consolidated with Idea’s revenues, which was over Rs 4,400 crore for the fiscal 07. The consolidated net profit was Rs 503.2 crore. On a standalone basis, Idea’s revenues for full year were Rs 2826 crore while the net profit was Rs 277.7 crore.

Earlier this year, the AV Birla group flagship Aditya Birla Nuvo (ABN) sold its wholly-owned subsidiary Aditya Birla Telecom (ABT) to Idea Cellular for Rs 10 crore. The A V Birla group had floated ABT in 2005 as a back-up mechanism when it did not fully own Idea Cellular. Through ABT, the group filed applications with the Department of Telecom (DoT) for licenses in Mumbai and Bihar circles. Since Idea was earlier jointly owned by the Tatas and Birlas, the group needed a separate vehicle to apply for telecom licenses in newer circles. Now, the company is in the process of rolling out network in Bihar. Idea is expected to commence operations in Mumbai and Bihar by the end of this year. It is also likely to start NLD services during the current fiscal.