INDIA’s Reliance Communications, burdened by debt and the cost of rolling out 3G services, said its board had agreed to sell up to 26 per cent of the firm, which could be worth nearly $2bn at current market levels.
Reliance Comm, India’s second-biggest mobile carrier, did not disclose any timeframe for a possible deal in its statement yesterday, but its shares gained 14 per cent last week, with speculation rife that Abu Dhabi’s Etisalat and South Africa’s MTN could be potential partners.
Yesterday, there were further reports that Reliance Comm and US telecom giant AT&T have sounded out each other’s interest about a deal in which AT&T would take a significant minority stake in the Indian cellphone company.
Cutthroat competition in India’s 15-player mobile market, which has crushed margins and share prices, has fuelled predictions that consolidation is only a matter of time.
Shares in Reliance Comm are valued by the market at $7.4bn, but analysts said any strategic investor is likely to come in at a significant premium. Even after last week’s rally, Reliance Comm stock is 80 per cent below its early 2008 peak.
Yesterday's statement, confirming the company’s active interest in making a deal, could further lift shares.
“Last week it was just a rumour. Now, there is clarity from the seller side. The stock should have a good upside because the market is keenly awaiting the deal,” said Jagannadham Thunuguntla, equity head at SMC Capitals in New Delhi.
Reliance Comm, controlled by billionaire Anil Ambani, had net debt of 199 billion rupees ($4.3 billion) at the end of March and last month paid 85.85 billion rupees for third-generation (3G) licenses.
City A.M. Reporter