Emirates Telecommunication Corporation, or Etisalat, is evaluating several Indian telecom firms for a possible acquisition of a stake but has not reached a final decision, its chairman said.
Commenting on a media report that Arab world’s second largest telecom operator was in talks with Reliance Communications for a $3.8 billion deal, the chairman of Etisalat Mohammad Hassan Omran confirmed on Wednesday that his firm was engaged in talks with several operators.
However, Omran declined to comment specifically about the Reliance report. He said Etisalat had not taken any final decisions. “It may take a few weeks or it may take a few months,” he said.
Buying a stake in India’s second-biggest mobile operator Reliance Communications would give Etisalat a vital presence in the world’s fastest-growing mobile market, where it owns a stake in a start-up telecoms firm.
If the deal is finalised, Etisalat will make an open offer to acquire an additional 20 per cent stake in the Indian firm from the public, an Indian newspaper said, citing market sources.
“We think the Indian market is ready for consolidation,” Omran said.
Reliance Communications said it has been receiving proposals from time to time from international telecom companies expressing interest in acquiring a strategic equity stake in it.
Abu Dhabi-based Etisalat bought a stake in an Indian telecoms firm in 2008, which has been since renamed to Etisalat DB Telecom India. The company launched services in March.
Indian rules prohibit a company from holding a more than 10 per cent stake in two operators competing in the same telecom zone, which might force Etisalat either to sell its holding in the start-up Etisalat DB, or merge it with Reliance.
“Maybe you could see a two-step transaction, first an initial investment of less than 25 per cent and then a merger of Etisalat DB Telecom with an incumbent,” said Simon Siminion, telecoms analyst at Shuaa Capital in Dubai.
“If the speculation is true that Etisalat is partnering Reliance, we could see a small investment (about 10 per cent) to comply with current regulations in India and a second stage merger of Etisalat DB Telecom with Reliance,” he said.
For Reliance Comm, this would bring in much-needed funds, especially as the company is caught in a margin-destroying price war and is paying billions of dollars for next-generation licences.
Reliance Comm, one of the worst performing shares in Mumbai’s 30-share index so far this year, closed 11 per cent higher on Wednesday, while Etisalat stock was down 0.5 per cent.
K.K. Mital, head of portfolio management services at Globe Capital in New Delhi said: “Players like Etisalat are looking at long-term opportunities of the Indian telecoms market despite the short-term pain due to competitive pressure.”
India has more than 600 million subscribers and nine of the fifteen operators already have foreign partners.