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Spice Group Acquires Cellucom India

Cellucom Hotspot

Cellucom HotspotThe Spice Group has acquired Cellucom India and is on its way to consolidating its mobile retail chain across the country.

Cellucom India was until recently a joint venture by the RP Goenka Group and Dubai-based Cellucom, until the latter bought it over last year. It operates around 120 mobile and IT product stores in the country, while Spice Group’s Hotspot has 500 outlets. The companies have exchanged shares in a cash-less deal that gives Cellucom 26 percent stake in HotSpot while Spice Corp will buy all shares of Cellucom India.

Cellucom India and Hotspot will merge into Hotspot Cellucom for now, and will be rebranded soon. Who has known Modi to resist when it comes to re-branding? The workforce of the combined chains is over 2200 employees. Hotspot’s CEO and CFO will be retained. Modi intends to invest Rs. 1 Billion in the chain, and is targeting Rs 10 billion in revenue by fiscal 2009.

Is he being too optimistic? The mobile retail business is a high volume, low margin game, and most venture capitalists stayed away from it. It is also a difficult market to bet on as realty prices continue to be a cause of concern while handsets are becoming cheaper. Mobile sales, even of the low-end ones, are predicted to plummet by 10 percent this year globally.

Competition

Spice Groups primary competition in the retail space is from The Mobile Store, backed by the Essar Group and Virgin. The Mobile Store has 1350 outlets and employs over double the number of skilled workers. The unorganized market is also a force to reckon with, with thousands of mobile retailers of varying sizes and shapes contributing to 70 percent of overall handset sales in the country. To combat these odds, the quick integration of their franchisee networks (Cellucom’s Xpress model) could become Hotspot’s strength and may help the stores break even in a year. Bangalore based MobileNXT is backed by TV18, which owns 35% in the company, Advendus Advisors and some angel investors.

Meanwhile, Modi has joined the race for Satyam. He has bid for a controlling stake in Satyam, offering Rs 20 billion through his Delhi-based holding firm Spice Innovation, Business Standard reports.

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