Mumbai: Country’s No. 2 mobile carrier Reliance Communications, burdened by debt and the cost of rolling out 3G services in a fiercely competitive market, said on Sunday its board had agreed to sell an up to 26% stake.
Reliance Communications, controlled by billionaire Anil Ambani, also said in a statement its board approved pursuing other “appropriate strategic consolidation opportunities.”
The company did not disclose any timeframe or details for a possible deal, but said its board had approved the issue of equity to strategic or private equity investors at a premium to the prevailing market price.
“This could be an enabling provision to accommodate any of the potential deals being discussed in the market,” said S.P. Tulsian, a Mumbai-based independent investment analyst.
Reliance Comm said last week it had received proposals from international telecoms firms to buy a strategic equity stake, after a newspaper report said Abu Dhabi-based Etisalat was eyeing a 25% stake for Rs18,000 crore ($3.9 billion).
Separately, Economic Times newspaper also reported last week Reliance Comm was considering a merger with South Africa’s MTN, with which the Indian firm had initiated tie-up talks in 2008 in an ultimately thwarted deal.
An MTN spokeswoman said on Sunday the company was not in talks with Reliance Comm.
Reliance Comm has been seeking much-needed funds amid a margin-destroying price war and the multi-billion-dollar cost of rolling out third-generation mobile services.
Reliance Comm had a net debt of about Rs19,900 crore ($4.3 billion) at the end of March, while it paid Rs8,585 crore for acquiring third-generation spectrum licences in a recent auction.
The company is also one of the bidders in an ongoing auction of wireless broadband spectrum licences, in which bids for all-India coverage licences have already crossed $2 billion.
Shares in Reliance Comm, valued by the market at $7.4 billion, gained 14% last week amid reports of a possible deal.
India’s 600-million-subscriber cellular market is the world’s fastest-growing, but call rates have slumped as low as 0.4 US cents per minute amid competition.
Nine of the 15 operators already have foreign partners, with Reliance Comm the only big telecom firm not to have a direct foreign stake.
Two years ago, Anil Ambani’s bid to merge Reliance Comm with MTN was scuppered when his long-estranged brother Mukesh asserted a right of first refusal on the Indian firm’s shares.
But last month, the Ambani brothers ended an agreement not to compete in businesses with each other, freeing Reliance Comm to bring in outside investors.
Etisalat, which already has a start-up joint venture in India, said last week it was looking to buy a stake in an Indian operator and was in talks with several firms but declined to be specific. Etisalat’s chairman told Reuters his firm could decide within weeks about a deal in India.
Buying a stake in India’s second-biggest mobile operator would give Emirates Telecommunications Corp or Etisalat, a vital presence in the world’s fastest-growing mobile market.