Providence invests $640m in Indian telecom

The US buyout firm has agreed one of the country's largest private equity deals with Aditya Birla Telecom, a subsidiary of Providence portfolio company Idea Cellular.

Providence Equity Partners has ventured further into India’s fast-growing wireless communication sector with a $640 million (€407 million) investment in Aditya Birla Telecom Limited (ABTL). The deal is one of the largest private equity transactions agreed in India, the firms said.

The company is a subsidiary of Idea Cellular, which in 2006 sold an estimated 10 percent stake to Providence ahead of its initial public offering. Minority stakes were also sold to other firms including TA Associates, Sequoia Capital, ChrysCapital, Citigroup and Macquarie for a combined $966 million in private placements, Arun Nataranjan, founder of data provider Venture Intelligence, said previously.

“We are pleased with our successful partnership with Idea and look forward to extending that relationship to this important investment in the future of India’s mobile communications sector,” said Biswajit Subramanian, managing director of Providence Equity Advisors India, in a statement.

Providence’s investment in ABTL will be used to fund ongoing operations and network rollout of the company, which owns a telecom license for the states of Bihar and Jharkand, “the second highest population among all service areas of India, but with the lowest mobile penetration”, the firms said.

ABTL will also hold a 16 percent stake in Indus Towers, a joint venture by Vodafone Essar, Bharti Airtel and Idea Cellular to provide passive infrastructure services to various mobile operators.

Wireless telecom company Bharti Airtel in February received a $250 million investment from Kohlberg Kravis Roberts. In December 2007, it raised $1 billion from Temasek Holdings, The Investment Corporation of Dubai, Goldman Sachs, the Macquarie Group, AIF Capital, Citigroup and India Equity Partners.

Warburg Pincus, which invested around $300 million in Bharti in 1999, realised about $1.9 billion from the sale of its shares through a series of partial exits.

Providence is currently investing a $12 billion buyout fund, closed in February, and has increased the target of its debut debt fund to $1 billion.