UAE's Etisalat In Talks To Buy 25% Stake In Reliance Communications: Times Of India

[Arun 795]

June 2, 2010, 04.26 am IST

Times News Network

When the Ambani brothers announced the scrapping of their non-compete agreement, TOI had predicted that Anil Ambani's Reliance Communications was likely to get outside investment soon. Now, it is learnt that UAE-based telecom major Etisalat is in talks to buy a 25% stake in the company. According to market sources, negotiations are at an advanced stage for the deal, which would be worth around Rs 18,000 crore.

A banking source claimed that after acquiring 25% in Reliance Communications, Etisalat will make an open offer to acquire an additional 20% stake from the public.

Reliance Communications refused to comment on the news. Etisalat's official spokesperson also denied any such development. However, reliable sources close to the talks confirmed the news.

At present, 67.58% equity in Reliance Communications is owned by Anil Ambani and the rest by public and institutional investors. If the proposed deal is completed, the company's paid-up capital will expand by 25%, which will bring down Anil Ambani's stake to around 55%.

However, this will help Reliance Communications to consolidate its position in the highly capital-intensive sector. The company has already paid over Rs 8,500 crore for 3G licenses. To roll out the network also, it will have to spend a huge amount. A telecom sector expert predicted that many other companies would also divest stakes to raise funds for 3G network rollouts.

To complete the deal, Etisalat will have to divest its existing stake in Etisalat DB Telecom. According to existing regulations, a single entity cannot hold more than 10% stake in two or more companies. As Etisalat owns around 45% in Etisalat DB Telecom, it will have to sell its stake to acquire 25% in Reliance Communications. Etisalat had made a total investment of around $900 million in 2008 to buy the stake in Etisalat DB. A market source said that as Etisalat DB Telecom has yet to roll out its network in the 15 circles, in which it has licenses, the foreign partner is looking for other opportunities to enter the Indian market.

Etisalat operates in 18 countries across Asia, the Middle East and Africa, servicing over 100 million customers. In 2009, it earned a net profit of UAE Dirham 8.836 billion (Rs 11,342 crosre) on a revenue of UAE Dirham 30.831 billion (Rs 39,575 crore).

Reliance Communications earned a revenue of Rs 20,685 crore in 2009-10. Its net profit during the period was Rs 4,777.44 crore. The company operates both GSM and CDMA networks and provides mobile services to over 100 million customers.

Reliance Communications Says Etisalat Report Is ‘Speculation’

Bloomberg

June 02, 2010, 2:07 AM EDT

Reliance Communications Ltd., India’s second-largest wireless operator, said a media report that Emirates Telecommunications Corp. may buy a stake in the Anil Ambani-owned company is “speculation.”

The Times of India, citing bankers it didn’t identify, reported today that Emirates Telecommunications, known as Etisalat, is in an advanced stage of talks to buy 25 percent of Reliance Communications and will make an offer to buy an additional 20 percent from other investors after the acquisition.

Mahesh Prasad, president of Reliance Communications, declined to comment, saying the report is “speculation.”

Reliance Communications rose 6.5 percent to 147.85 rupees as of 11:01 a.m. in Mumbai, compared with a 0.4 percent gain in the benchmark Bombay Stock Exchange Sensitive Index. Earlier, the shares jumped as much as 10.5 percent.

The Economic Times yesterday reported that the Indian operator may restart merger talks with South Africa’s MTN Group Ltd. after earlier negotiations collapsed in July 2008. Gaurav Wahi, a spokesman at Reliance Communications, yesterday said the company doesn’t comment on speculation and didn’t know where the report originated.