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Etisalat says in India talks, R-Com surges

Etisalat says in India talks, R-Com surges
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First Published: Wed, Jun 02 2010. 10 28 PM IST
Updated: Wed, Jun 02 2010. 10 28 PM IST
Abu Dhabi/Mumbai: Abu Dhabi’s Emirates Telecommunications Corp., or Etisalat, could decide within weeks whether to take a stake in an Indian telecoms operator, its chairman said on Wednesday, after a newspaper reported that it was in talks with Reliance Communications Ltd (R-Com).
R-Com shares rose 11% to close at Rs154.60 in Mumbai after The Times of India report said Etisalat, which is the Gulf region’s biggest provider of telecoms services by market capitalization, was in advanced talks to buy a quarter of the Indian cellular operator for Rs18,000 crore ($3.8 billion).
“We are talking to several Indian operators and are evaluating several Indian operators but have not reached a final decision,” Mohammad Omran, chairman of Etisalat, told Reuters. Omran declined to comment specifically about the Reliance report and said that Etisalat had not taken any final decision. “It may take a few weeks or it may take a few months,” he said.
A day earlier another media report linked R-Com to possible tie-up talks with South Africa’s MTN Group Ltd. A person close to the Indian firm, who declined to be identified, said both reports were speculation.
R-Com is controlled by billionaire Anil Ambani, who recently ended an agreement not to compete in businesses with his long-estranged brother Mukesh, freeing him to bring outside investors into India’s second biggest mobile operator.
That surprise announcement has prompted market speculation about the plans of both brothers now that their conglomerates are free to compete on each other’s turf.
Two years ago Mukesh Ambani thwarted a planned tie-up between Reliance and MTN by asserting a right of first refusal on the Indian carrier’s shares.
If a deal is finalized Etisalat would make an open offer to acquire an additional 20% stake in R-Com from the public, The Times of India said on Wednesday, citing market participants it didn’t identify.
The equity capital of Reliance would expand by 25% if a deal is done and would reduce the stake of Anil Ambani to about 55% from 67.58%, the paper said. An R-Com official declined to comment.
India’s cellphone market is fiercely competitive, with 15 operators locked in a price war that has destroyed margins and prompted talk of consolidation.
“We think the Indian market is ready for consolidation,” Omran said.
Etisalat already has a stake in an Indian mobile venture, Etisalat DB Telecom, which launched operations in March.
Indian rules prohibit a company from holding a more than 10% stake in two operators competing in the same telecom zone, which might force Etisalat either to sell its holding in the start-up or merge it with R-Com. India’s telecoms regulator in May recommended ending the restrictions on companies selling out.
REUTERS
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First Published: Wed, Jun 02 2010. 10 28 PM IST