* Launches share sale to funds in range of 131-136.35 rupees
* To use proceeds for future airwaves purchases
* Equity deals rising as new government takes power (Adds details, comment)
NEW DELHI, June 5 (Reuters) - Indian mobile operator Idea Cellular is raising up to $506 million through a share sale, it said on Thursday, seeking to tap growing demand for equities after a landslide election victory for new Prime Minister Narendra Modi.
The phone carrier, part of the diversified Aditya Birla conglomerate and about a fifth owned by Malaysia's Axiata , will use the funds raised to buy radio airwaves, according to a deal termsheet seen by Reuters.
Idea's share sale to institutional investors is the biggest in the local telecommunications sector since a December 2012 initial public offer by mobile mast operator Bharti Infratel Ltd .
The company, India's No.3 mobile phone carrier by revenue and customers, is selling shares in an indicative price range of 131-136.35 rupees apiece, the termsheet showed, a discount of as much as 3.9 percent on its Thursday closing price.
A strong response could help revive a raft of other equity deals that were put off in the past year due to an economic downturn and sluggish corporate earnings growth in Asia's third-largest economy.
Prime Minister Modi's Bharatiya Janata Party last month won India's first outright parliamentary majority in three decades, spurring hopes of a revival in an economy that is witnessing its longest spell of sub-5 percent growth since late 1980s.
"Since the markets have become quite buoyant we expect a slew of these new launches from corporates because of the pent up demand of the last few years," said Manish Kumar, chief investment officer at ICICI Prudential Life Insurance.
"We are positive on the telecom sector," Kumar added. "We are overweight on the sector mainly because ... data is the next growth story."
In the fiercely-competitive telecommunications market, which has the world's highest number of customers after China, leading carriers including Idea have seen their profitability improving in the past quarters as competition reduced after a court order on a licensing scandal revoking some carriers' permits.
The carriers get close to 85 percent of their revenue from voice services, but mobile data is growing faster as more people use the Internet through their mobile phones.
Idea, which bought airwaves worth $1.75 billion from a state auction this year, needs to buy more airwaves in the next sale to renew its permits in nine service areas.
Last August, Idea's board approved raising up to 30 billion rupees through the sale of shares. Additionally, Malaysia's Axiata is to buy shares worth 7.5 billion rupees to maintain its stake after the sale.
The Idea share offering follows a $500 million share sale last week by lender Yes Bank Ltd to bolster its balance sheet. The deal saw strong demand from overseas funds.