Abu Dhabi’s Etisalat has said it is looking at options in India, including Reliance communications, the Indian firm controlled by billionaire Anil Ambani.
Reliance communications, India’s No. 2 mobile operator, is looking to sell up to 26 % of the company to strategic or private equity investors, a stake worth about $2 billion current market levels.
Abu Dhabi’s Etisalat has said it is looking at options in India, including Reliance communications, but is the only operator thus far to acknowledge publicly any recent interest in the Indian firm controlled by billionaire Anil Ambani.
Reliance communication is burdened by debt and in need of cash to compete in a ferociously competitive 15-player market. It hopes that the opportunity to buy into the second-largest operator in the world’s fastest-growing mobile market proves enticing enough to attract bidders at a premium.
Regulations in India do not allow one company to hold more than a 10% stake in two competing telecom operators, ruling out existing players or their foreign partners from buying a Reliance communication stake unless they sell their current holding.
Below is a list of companies that might find Reliance Communications an attractive strategic investment.
Etisalat's chairman said on Monday his firm was studying options in India, including a possible deal with Reliance communication, and said cash was not a problem.
Etisalat owns a stake in a start up telecoms firm in India, Etisalat DB Telecom. Under Indian rules it cannot buy more than 10% of Reliance communication unless it decides to sell its stake in the current venture or merge it with Reliance communication.
Reliance communication and MTN were in negotiations in 2008 for a possible business combination through a share swap, but talks were ultimately called off after Anil's long-estranged brother Mukesh asserted a right of first refusal.
The Ambani brothers recently called off a pact that prevented them from competing on each others turf, which also frees up Anil Ambani to bring an investor into Reliance communication.
MTN's merger talks with Reliance communication’s rival Bharti Airtel failed twice in 2008 and 2009 and Bharti later agreed to buy Kuwaiti telecom Zain's Africa operations.
Speculation is rife that MTN might revive talks with Reliance communication, though the South African firm has said it was not in talks with Reliance communication.
American Telephone and Telegraph (AT&T) late on Monday said it was not in talks with Reliance communication after media reports said they had held discussions.
AT&T sold its stake in India’s Idea Cellular in 2005 and has sought a new foothold in India, where it provides other business and IT services such as enterprise hosting services. It applied for a telecom license in 2007 but has not yet received it.
Mukesh Ambani’s Reliance Industries
Anil Ambani's older brother is the world's fourth-richest man, according to Forbes.
Mukesh Ambani was a driving force in Reliance communication before the family business empire was split between the brothers in 2005 over ownership disagreements, and is believed to covet an eventual return to telecom.
While the Ambani’s last month did away with an agreement that had been a frequent source of friction between them, some observers have said the bad blood between the two long-feuding brothers runs too deep for them to invest together anytime soon.
Many in the Mumbai market nonetheless speculate that Mukesh could step in with an investment in the company he had helped build.
China Mobile
The world’s largest cellular carrier is cash-rich and under margin pressure at home and may seek to expand abroad.
Last year, India’s business standard newspaper reported the state-controlled Chinese firm and Reliance communication had started talks for an alliance, with possible 5-6% equity participation.
But buying a stake in an Indian firm won’t be easy for China mobile at a time when India is suspicious of Chinese telecoms gear amid worries that it could have spying technology embedded that would endanger national security.
Despite its financial muscle, China mobile has also proven a skittish overseas investor.
Verizon Communications
U.S.-based Verizon could be an appropriate partner for Reliance communications, given its expertise in CDMA telephony. Reliance communication is predominantly a CDMA operator, but last year expanded its smaller GSM network to most of India.
A deal with Reliance communication would, however, pit Verizon against Vodafone, which is its partner in its wireless venture in the United States.
Vodafone controls India’s No.3 mobile operator, Vodafone Essar.
Vivendi
Europe’s largest entertainment firm has said it was on the lookout for targets in emerging market telecoms, and said early last month it had no immediate acquisitions in world.
The French company, which made a $4 billion acquisition in Brazil last year, has vowed not to do any deals that would threaten its investment grade credit rating or dividend.
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