Idea Cellular

Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number	25545
Company name	Idea Cellular Limited
Country	India
Sector	Information
Environmental category	B
Department	Global Inform. & Comm. Tech.
Status	Pending Disbursement

Date SPI disclosed	February 19, 2008
Projected board date	March 20, 2008
Previous Events	Signed: June 26, 2008 Approved: March 20, 2008

View Environmental & Social Review Summary (ESRS), click here

Overview

Sponsor/Cost/Location

Development Impact

Contacts

Attachments

Project description

The project consists of the upgrade and expansion of Idea Cellular Limited’s cellular telephone network in India. Idea Cellular (Idea or the company) is seeking financing to complete its FY2007-09 capital investment program which consists of:

- strengthening and expanding the company’s existing GSM mobile network;
- launching operations in the new telecommunication service areas of Mumbai and Bihar; and
- installing and maintaining a National Long Distance (NLD) network.

With the completion of the project, Idea’s network will cover approximately 70% of India’s total mobile subscriber base.

Anticipated development impact of the project

Some of the development impact highlights of this project are as follows:

- Expand access to telephony in underserved and rural areas:

Rural teledensity in India currently stands at around 5%, as compared with approximately 30% in urban areas. Through this project, Idea will expand its existing network into semi-urban and rural areas.

- Expand access to telephony in frontier states, e.g. Bihar:

Bihar is one of the poorest states in India, with close to 50% of the population living below the poverty line and a mobile penetration rate of about 8%. Through this project, Idea will extend its network into Bihar.

- Enhance competition:

This project will further enhance competition in India’s mobile telephony market, leading to increased quality of services and lower prices for consumers.

- Increase employment:

Idea currently provides direct employment for 4,700 people and indirect employment for considerably more people through its distributor network. As Idea expands it operations both within existing circles and into new areas, quality jobs will be created for its suppliers and distributors.

IFC's expected development contribution

IFC’s role and additionality in the Project are as follows:

- Mobilization of long term funding from international commercial banks:

IFC will assist Idea by mobilizing up to $150 million of additional funding from international banks in a B Loan syndication.

- Provision of long-term financing:

IFC will be providing the longest tenor debt available to Idea. This is particularly important given the very sizeable capital expenditures planned over the next several years, and the long payback periods of mobile projects in low tariff countries such as India.

- IFC Advisory Services support for Shared Phone Program:

Idea has initiated discussions with IFC regarding the design and implementation of a Shared Phone program that aims to spread connectivity to underserved populations in rural and low income urban areas of India. This program is patterned after the Village Phone programs in Bangladesh, Uganda and Nigeria.

- Knowledge sharing on other initiatives:

IFC’s knowledge and experience in the sector is of interest to Idea, especially our experience with the new business models the company is developing. In addition to the Shared Phone program, Idea seeks to leverage IFC’s knowledge, experience and relationships with other operators and industry groups to develop new initiatives around increasing rural access and e-applications in the health care and banking sectors.

Environmental and social issues - Category B

This project involves the upgrade and expansion of a cellular network, with construction and maintenance of cellular tower sites and related facilities. The key environmental and social issue associated with the project is implementation of a formal, integrated policy and procedures for environmental, health, safety, and social management, including labor and working conditions of both employees and contractors. The nature of the company’s operations is such that no major adverse environmental or social impacts are expected to result from the project, and it will be possible to avoid or mitigate any limited adverse impacts that might result. As a result, it has been classified as a Category B project according to IFC’s Procedure for Environmental and Social Review of Projects.

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