Sony Ericsson may buy Spice Mobile

The world’s third-largest handset manufacturer Sony Ericsson is in talks to acquire BK Modi’s Spice Mobile. Spice Mobile is the handset company of the Modi group and sells mobile phones under the Spice brand. Sources close to the development confirmed that the Modi group had demanded Rs 80-100 per share, which values Spice Mobile at around Rs 700 crore.

BK Modi directly owns about 64% in Spice Mobile. However, it is not clear if Sony Ericsson will accept this price. Spice Mobile shares closed at Rs 22.7 on BSE on Thursday, which gives the company a market capitalisation of around Rs 177 crore. In the last 40 days, Spice Mobile shares have lost one-third of the value, from a high of Rs 35.9 on May 29.

A top source in the Spice group confirmed the development and said that while talks were on, the deal had not been finalised. The source also added that initially, Spice Mobile had approached Sony Ericsson for a ‘wide-ranging collaboration and partnership’, but as the talks progressed, it was felt that an acquisition would suit both companies better. “If Sony Ericsson were to acquire more than 50% in Spice Mobile, it will have to make an open offer as per our regulations. They want to acquire a majority stake, but it has not yet been finalised if it will be a 100% buyout,” the source added.

If the deal goes through, this will mark yet another exit of the BK Modi group from the telecom sector. Just last month, BK Modi had divested his 40% stake in mobile service provider Spice Communications for Rs 2,700 crore. The BK Modi group also owns Cellebrum, a VAS company, and Hot Spot, a handset retail chain.

Sony Ericsson is currently the third-largest player in the Indian handset market after Nokia and Samsung. Market watchers also pointed out that it was only recently that Samsung had taken over the No 2 slot from Sony Ericsson in India. While Spice Mobile is a recent entrant in the Indian handset market, the company has been able to make impressive gains as it offers some of the cheapest handset models in the country.

Spice Mobile sources said that the company was registering sales of close to 200,000 handsets a month. Unofficial industry figures peg Sony Ericsson’s monthly sales at over 400,000 units and Samsung at about 4,50,000 handsets. A Sony Ericsson-Spice Mobile combine will be the second-largest handset player in the country.

Spice Mobile is setting up a manufacturing facility in Baddi in Himachal Pradesh. Currently, the company procures all its handsets from contract manufacturers in China and Taiwan. A Spice Mobile executive said the company had a large team that designed handset models and customised as per the needs of Indian customers, which are then manufactured abroad. Spice Mobile was recently in the news when Mr Modi launched what it termed as the ‘People’s Phone’, a low-cost handset, for Rs 599.

source : http://economictimes.indiatimes.com/