UAE's Etisalat in talks with Reliance Communication

Abu Dhabi's Etisalat confirmed it is looking to buy a stake in an Indian mobile operator, after a report that it was in talks with cash-hungry Reliance Communications for a $3.8 billion deal.
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, where it owns a stake in a start-up telecoms firm.

For Reliance Comm, controlled by billionaire Anil Ambani, this would bring in much-needed funds, especially as the company is caught in a margin-destroying price war and is paying billions of dollars for next-generation licences.

Reliance Comm, one of the worst performing shares in Mumbai's 30-share index so far this year, closed 11 percent higher on Wednesday, while Etisalat stock was down 0.5 percent.

K.K. Mital, head of portfolio management services at Globe Capital in New Delhi said: "Not only Reliance Communications but some other players will also be looking at selling some stake to raise funds to cut debt." "Players like Etisalat are looking at long-term opportunities of the Indian telecoms market despite the short-term pain due to competitive pressure," he said.

India has more than 600 million subscribers and nine of the fifteen operators already have foreign partners. Reliance Comm is the only big telecom firm not to have a direct foreign stake. Call rates have slumped to as low as 0.4 U.S. cents per minute in the world's largest market after China.

Etisalat's Chairman told Reuters his firm could decide within weeks about a deal in India. Reliance Comm said it has been receiving proposals from time to time from international telecom companies expressing interest in acquiring a strategic equity stake in it.

The Times of India newspaper said the Gulf region's biggest provider of telecoms services was in advanced talks to buy a quarter of Reliance Comm for 180 billion rupees ($3.8 billion). The market is currently valuing the Indian company at about $7 billion. The stake sale could mean a change in strategy for ambitious Ambani, who made several smaller acquisitions to expand his firm overseas, and in 2008 set his sight for a tie up with South Africa's MTN in an ultimately thwarted deal.

Last month, Anil Ambani ended an agreement not to compete in businesses with his long-estranged brother Mukesh, which also frees him to bring outside investors into his firm. A person close to Reliance Comm, who declined to be identified, said the report was speculative.