Aditya Birla Telecom (ABTL), a subsidiary of Idea Cellular will issue compulsorily convertible preference shares for $640m to Providence which on conversion will translate to a 20% stake in ABTL. ABTL owns a 16% stake in Indus Towers (a joint venture between Bharti, Vodafone and Idea in 16 service areas to share passive infrastructure) and owns a telecom licence for the Bihar service area.

The Providence transaction that values ABTL’s equity at US$3.2b (vs. Idea’s current market cap of US$6.6b), suggests that Providence paid an uncalled premium when the Indian Telecom market is headed for extremely low margins, really especially in the Wireless business. Only Integrated Telecom players will see higher EBITDA and growth while smaller ones need to change their business strategy to survive post 3G license auctions.

Idea management has raised money for expansion as well as monetized its 16% stake in Indus Towers.