Partners no more: Tata Industries' Ratan Tata (left) with Aditya Birla Group's Kumar Mangalam Birla

What goes around comes around. That adage takes on a slightly different meaning in the long trip that IDEA Cellular has been on since 1996-when it actually wasn't IDEA Cellular, but a one-circle operation run by the Birla-AT&T combine (with AT&T holding 49 per cent). Last fortnight when the Aditya Birla Group decided to buy out the Tatas' 48.14 per cent stake in IDEA Cellular for Rs 4,406 crore, it signalled the end of a journey that along the way witnessed one merger, an attempted but aborted partnership between three Indian promoters, a big-ticket acquisition, an attempted but unsuccessful attempt by a foreign player to buy in and, to top it all, a face-off between the final two shareholders left standing. The Aditya Birla Group now controls a little over 98 per cent in IDEA Cellular, with NRI (non-resident Indian) businessman and Tata confidant C. Sivasankaran apparently holding the rest (although this cannot be confirmed). Three-four years ago, such a finale appeared unlikely, considering Chairman K.M. Birla was focussed on his commodities-based empire, and telecom appeared to be nothing more than a financial investment.

But plenty has changed since the Birlas took the plunge into cellular services with AT&T's operations in Maharashtra a decade ago, and Gujarat a year later. By the turn of the century, Birla AT&T had merged with Tata Cellular-which provided services only in Andhra Pradesh-to create Birla-Tata-AT&T (the Tatas were holding 31.69 per cent, the Birlas held 33.69 per cent while AT&T Wireless held the balance 32.9 per cent), unflatteringly christened Batata by the media. One deal that didn't quite pan out a few years down the line was when Batata attempted to merge its operations with Rajeev Chandrasekhar's BPL Communications.

Fast forward to 2004, from which time began the most intense period for IDEA Cellular, and the turning point was when the foreign partner-Cingular Wireless-put its 32.9 per cent stake in IDEA Cellular on the block (Cingular, which had acquired AT&T Wireless, didn't think India to be a priority market). A consortium formed by Singapore Technologies Telemedia (STT) and Telekom Malaysia (TM) combine came close to acquiring Cingular's stake, till it was stymied by the Department of Telecommunications (DOT). In a decision that stumped most people in the market, the Tatas and the Birlas agreed to buy out Cingular's holding equally between them.

Once the Tatas and the Birlas increased their holding in IDEA Cellular-the Tatas' shareholding had increased to 48.14 per cent while the Birlas were at 50.14 per cent)-it seemed as if the promoter issues were out of the way. Until the Aditya Birla Group fired a communiqué to DOT (dated February 8, 2006) accusing the Tatas of non-compliance (this implied that the Tatas were providing CDMA services in every circle where IDEA Cellular was operating, which was a conflict of interest. The Birlas also demanded that the Tatas drop their holding in IDEA Cellular to 10 per cent in line with government regulation, which stated that an operator in one circle cannot hold more than 10 per cent in another operator in the same circle). Suddenly, the future of the company appeared uncertain. Mercifully for IDEA Cellular, the Tatas agreed to sell their stake. Interestingly, Malaysian telecom major Maxis offered to buy out the Tatas' holding at Rs 40.50 per share before the Birlas matched the offer on the "first right to refusal" premise.

IDEA Cellular CEO Vikram Mehmi: In control now

What is perhaps strange is that out of the 48.14 per cent that was held by the Tatas in IDEA Cellular, 33.14 per cent will now be offered to financial investors at the same terms at which the stake was acquired from the Tatas. Effectively, this means that the stake will be sold at the same price and the Birlas will not profit from this transaction. Following this deal, the Aditya Birla Group will hold a little over 65 per cent in IDEA Cellular-still enough to possibly bring in another investor or go in for an IPO (initial public offering). The Tatas, meantime, get some much-welcome cash for their CDMA rollout.

But what does the future hold for IDEA Cellular? An investment banker who has been tracking the company for a while says that valuations for Indian telecom have been on the rise and this augurs well for IDEA Cellular. IDEA Cellular is the fifth largest wireless player in India with a subscriber base in excess of seven million. What should provide a boost to valuations is its proposed plan to enter the lucrative Mumbai cellular circle for which an application has already been filed with DOT. What's more, the acquisition of Escotel gave IDEA not just three existing operations, but also licences for three other circles: up (East), Rajasthan and Himachal Pradesh. The best part, though, as Salil Pitale, Vice President, Enam Financial Consultants, puts it, is: "The question of who is promoting IDEA Cellular is fully answered." Amen.