Etisalat seeks full control over its Indian mobile arm

Etisalat seeks approval to take full control of its Indian subsidiary, Etisalat DB, which plans to launch mobile services in 15 cities across India in March.

Etisalat is in talks with the Indian government about the telecommunications company taking full control of its subsidiary in the country, Etisalat DB. With only 46 per cent of the Indian population owning a mobile device, the market is considered a lucrative opportunity for telecoms. The additional investment Etisalat is seeking to make would provide the company with greater financial control over Etisalat DB, which is due to launch mobile services in 15 cities across India in March. Etisalat originally bought its 45 per cent stake in the former Swan Telecom from the Dynamix Balwas Group in December 2008 for US$900 million (Dh3.3 billion), which included a premium to control the company's management. Etisalat's stake values the Indian subsidiary at $1.53bn. Majed al Musalli, the chief executive of Etisalat DB, confirmed that Etisalat was seeking to increase its stake, despite recent reports to the contrary. "We have applied to the [foreign] investment promotion board for additional share in the company," Mr al Musalli said. "That is normal practice in India when a company wants to increase their stake in an Indian company." The board is the Indian government body that must approve investment deals that give foreign companies a majority control of Indian firms. The increased stake is seen as a formality, as the subsidiary's revenues are already consolidated in Etisalat's balance sheet, said Delilah Heakal, the vice president of research for Pharos Holding. "You have less minority interest that you're paying to minority shareholders, so that should boost the bottom line somewhat, and cash flow that is attributable to the total stake increase," Ms Heakal said. She said Etisalat DB was forecast to provide its parent company with about 3.6 per cent of its total group revenues by 2012. Last month, media reports said Etisalat had bought an additional 5.27 per cent stake in its Indian subsidiary for 3.8bn rupees (Dh305 million) from Genex Exim Venture, an investment firm based in Chennai. But Mr al Musalli said Etisalat could not agree on terms for an additional stake in Etisalat DB until the Indian government formally approved the deal. "First, government approval has to be there, and then we can negotiate for the price," he said. Although Etisalat already has management control of Etisalat DB, Mr al Musalli said the additional stake would provide "strategic and long-term business sustainability" to the company's presence in India. "Etisalat is always trying to build its stakes," he said, adding that the company was still thinking of entering India's coming 3G wireless spectrum auction. While formal bidding has been delayed since October, the Indian telecoms regulator recently said the auction was scheduled to end before April. [e-mail]