Etisalat shops around for an Indian operator

The telecom holds talks with several Indian companies about purchasing a stake.

Etisalat has held talks with several Indian telecommunications operators about buying a stake and will make a decision to buy one in the coming weeks. Mohammed Omran, the chairman of Etisalat, confirmed the talks. "We are talking to several Indian operators and are evaluating several ? but have not reached a final decision," Mr Omran told Reuters.His comments were prompted by media reports that the company was in talks to buy a 25 per cent stake in India's Reliance Communications for 180 billion rupees (Dh14.05bn).

But Majed al Musalli, the head of the Etisalat Indian subsidiary Etisalat DB, dismissed the reports as "market speculation". "We studied it a long time ago and we may work with someone, but we did not say who, when and how much," Mr al Musalli said. "We may continue as is but we have to explore all options." In December 2008, Etisalat entered the Indian telecoms market after acquiring a 45 per stake in the former Swan Telecom from Dynamix Balwas for US$900 million (Dh3.3bn). In April, Etisalat launched its mobile service across 15 areas in India under the Cheers Mobile brand with the lowest mobile rates in the country - between 0.1 rupee and 0.6 rupee a minute.

Etisalat DB was one of a handful of Indian operators that failed to win any 3G spectrum licences in a wireless auction that ended last month after bidding passed the $2bn mark. But Reliance was one of the big winners after bidding 85bn rupees for 13 licences in cities including Kolkata, Delhi and Mumbai. Shares of Reliance on the Bombay Stock Exchange yesterday rose 11 per cent to 154.60 rupees, while Etisalat closed down 0.48 per cent on the Abu Dhabi Securities Exchange at Dh10.35.

Indian telecoms analysts have said that operators such as Aircel and Idea Cellular would make a good fit for Etisalat. Representatives from Reliance, Aircel and Idea Cellular declined to comment. Mr al Musalli declined to comment on whether Etisalat was in talks with Aircel or Idea Cellular. Amit Ahire, a telecoms analyst for Ambit Capital in Mumbai, said a deal between Reliance and Etisalat would make the most sense because the two operators had already signed a network-sharing agreement.

"The relationship is already there so it's a matter of extending it one step further," Mr Ahire said. "Etisalat is the 13th player in a crowded market. Ultimately, they have to buy something." But even if Etisalat announces an acquisition with another operator, it will have to wait for current government restrictions on mergers within the telecoms sector to be amended. Indian law states no operator can control more than 10 per cent of another operator that competes in the same licensed area.