In early 2000's. Indian mobile industry was enticing as market penetration was only at 17%. With a population of 1.3b, India was a humongous market that attracted lots of international telecommunications players. Temasek subsidiary, Singtel, invested into Bharti in 2000. ST Telemedia, 100%-owned by Temasek, had its eyes on Idea Cellular Ltd.
Idea was founded in 1995. It was a 3G GSM Indian mobile network operator based at Mumbai. At its height in June 2018, it had a huge subscriber base of 220 million. In Dec 2004 ST Telemedia announced a joint venture with Telecoms Malaysia to acquire 47.7% share of Idea Cellular from Cingular Wireless at a price of US$390m. ST Telemedia's share in the JV was to be 60% which worked out to US234m.
Idea was founded in 1995. It was a 3G GSM Indian mobile network operator based at Mumbai. At its height in June 2018, it had a huge subscriber base of 220 million. In Dec 2004 ST Telemedia announced a joint venture with Telecoms Malaysia to acquire 47.7% share of Idea Cellular from Cingular Wireless at a price of US$390m. ST Telemedia's share in the JV was to be 60% which worked out to US234m.
"ST Telemedia and TM International to acquire 48% stake in IDEA Cellular" ...ST Telemedia
The bid had to pass the scrutiny of the Foreign Investment and Promotion Board. There was a snag. Singtel was already holding 28% shares in Bharti, The JV would have allowed ST Telemedia a 28.7% holdings in Idea Cellular. Indian anti-trust laws prevent a company from holding more than 10% shares in more than 1 company in the same service sector. Regulatory approval could not be obtained.
Singapore Inc's scholarly minds consider Singtel and ST Telemedia two separate companies, but the smarty Indians saw the same Temasek colour. The JV wrote in to appeal by explaining Temasek's role in ST Telemedia is simply an investor. Singaporeans should by now be familiar with the official public refrain - Temasek does not interfere with the operation of its subsidiaries. Yet in all publications, Temasek has always advertised itself as an active investor. It's difficult to reconcile the two. When it comes to the crunch, it's no secret who calls the shots. Such goobledygook passes easily for divine truth with the public in Singapore, but highly legalistic Indians said "No can do'.
No amount of truth shifting explainer 101, no amount of bending backwards and placating the Indians, no CECA preferences, can change Indian minds when it comes to protecting their national interest. And so ST Telemedia came home empty-handed.
But what a blessing it was. The Indian PIPB saved Singapore taxpayers a huge sum of money. Firstly, the Indian rupee has depreciated by 100% against SGD since. ST Telemedia would have suffered tremendous translation losses. Secondly, Idea Cellular merged with Vodafone India in 2018. The share price of Vodafone Idea has slipped from about INR35 after merger to about INR8.35 today. Thirdly, the Supreme Court decision on the spectrum fees due from telecommunication companies, slapped Vodafone Idea with a bill for US$7.4b which the government intends to collect with delayed interest. And lastly, new kid on the bloc, Reliance Jio Infocomm Ltd, which only opened for business 2016, is killing the competition with lower rates and swinging subscribers away from Vodafone Idea and Bharti.
Vodafone Idea is dead man walking and may fold. The Indian regulator thus saved Singapore taxpayers. Too bad for the Malaysians. Telekom Malaysia went solo and acquired 20% of Vodafone Idea for US$2b in 2018. They have taken a severe beating having disposed some of their holdings and are practically begging for someone to take the rest of the shares off them.
The Indian telecommunication market has been an extremely competitive place with cut-throat pricing. The scene is littered with foreign regrets and big names that have quit the country include Norway's Telenor ASA, the UAE's Emirates Telecommunications Group Co, PJSC, Russia's Sistema, PJSFC, Docomo and AT&T. Telekom Malaysia wants to divest Vodafone Idea, and Singtel is struggling with Bharti.
Does it mean it's impossible for foreign investors to spin a $ in Indian telecommunications? In 2007 Hongkong Billionaire Li Ka Shing sold his majority share in Hutchison Essar Ltd, an Indian cellular play, to Vodafone for US$11.1b, netting him a profit of US$9b.
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