Etisalat in talks for 25-per cent stake in Reliance Communications?

02 Jun 2010

Emirates-based telecom major Etisalat is in talks to buy a 25 per cent stake in Anil Ambani's Reliance Communications, according to reports. Negotiations are at an advanced stage for the deal, which would be worth around Rs18,000 crore, The Times of India said citing unnamed market sources.

After acquiring 25 per cent in Reliance Communications, Etisalat will make an open offer to acquire an additional 20 per cent stake from the public, the report added.

The chairman of Etisalat Emirates Telecommunications Corp has said that the company is indeed in talks with several Indian telecom operators to buy a stake, CNBC-TV18 reported quoting agencies. The chairman, however, declined to comment on any deal specifically with Reliance Communications.

Reliance Communications refused to comment on the news. Etisalat's official spokesperson also denied any such development. However, the ToI report seemed confident in its sources.

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

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 per cent stake in two or more companies. As Etisalat owns around 45 per cent in Etisalat DB Telecom, it will have to sell its stake to acquire 25 per cent in R-Com.
 
Etisalat had made a total investment of around $900 million in 2008 to buy the stake in Etisalat DB.

After speaking to several sources, CNBC-TV 18 believes that a deal cannot happen in a hurry, but it cannot be denied either that the two companies are a good fit. In fact, Etsalat's operations in India run on the R-Com network.

Sources have indicated that a deal is a possibility in the wake financial duress being experienced by R-Com, which like other telecom companies has paid through its nose for acquiring 3G spectrum. There is also another party involved - the promoters of DB Realty.