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Unitech looks to offload 35% in telecom biz to a foreign player

Unitech looks to offload 35% in telecom biz to a foreign player
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First Published: Thu, May 01 2008. 11 44 PM IST

Looking for a partner: Unitech’s Sanjay Chandra. The company will invite financial bids from multinational telecom firms from today.
Looking for a partner: Unitech’s Sanjay Chandra. The company will invite financial bids from multinational telecom firms from today.
Updated: Thu, May 01 2008. 11 44 PM IST
New Delhi: Unitech Ltd, India’s second largest real estate developer by market value, will start inviting financial bids from multinational telecom companies from Friday to offload a 30-35% stake in its new telecom venture in an effort to raise adequate funds for the capital-intensive business.
Unitech will approach as many as 15 telecom companies with details of its venture, according to a person close to the development who did not wish to be identified. Telecom companies such as Italy’s Telecom Italia, Norway’s Telenor Group, South Africa’s Mobile Telephone Networks Group and Spain’s Telefonica SA are among the companies that will be approached.
Looking for a partner: Unitech’s Sanjay Chandra. The company will invite financial bids from multinational telecom firms from today.
The companies could not be reached for comment. Unitech is likely to finalize a telecom partner in the first week of June, the person said.
In January, Unitech’s eight subsidiaries received telecom licences to offer mobile services in all 22 telecom circles (or licence areas) in India. The subsidiaries have, together, paid the required entry fee of Rs1,658 crore, and provided financial bank guarantees of Rs630 crore and performance bank guarantees of Rs252 crore. While the financial bank guarantees are to ensure the firm meets its revenue sharing obligations to the government, the performance guarantees are linked to it launching its services by a certain date.
Unitech was also one of the five firms which recently received 4.4MHz of spectrum or radio waves in the 1,800MHz GSM band in Tamil Nadu, including Chennai (the two are separate circles). The firm plans to roll out services in Tamil Nadu in six months.
Unitech has estimated the total investment required for the telecom venture to be around Rs20,000 crore over the next three years. While the firm has funded the initial round of investment towards licence fee, it is looking to partner with foreign telecom firms which will bring in technical expertise and financial investment. “Given the credit crunch in the financial markets, it may be difficult for real estate companies to raise money especially for an industry they have no experience in,” said Nitin Khandkar, senior vice-president, research, Keynote Capitals Ltd. “But, raising money would be difficult more so because of the market conditions and less because of the fact that they have no experience in the telecom business,” he added.
The real estate market has slowed after three years of dizzy growth. Many people have deferred buying property because of tighter credit and high prices.
“It is quite possible that Unitech will need at least around Rs10,000 crore for its telecom business over the next two or three years,” said an analyst with a domestic brokerage who did not wish to be identified. “It is big money. While the telecom partner will bring in some money, the company could also look at divesting stake to the public once the business is set or they could sell off their stake.”
Unitech is in talks with several leading foreign telcos looking to establish a presence in the world’s fastest growing telecom market where at least 8 million mobile services subscribers are added every month. India currently has 261.1 million mobile phone subscribers, second only to China’s 540.5 million, according to recent numbers released by the industry regulator, the Telecom Regulatory Authority of India or Trai.
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First Published: Thu, May 01 2008. 11 44 PM IST