Race for Datacom heats up

India is the world's fastest-growing mobile market, with four new national operators

Etisalat may face off with one of the world's richest men in its quest to acquire the Indian mobile network Datacom. Carlos Slim is the Mexican telecommunications magnate whom Forbes magazine listed as the second-richest man in the world this year. His mobile business America Móvil will bid for a majority stake in the newly formed operator, the Times of India reported, citing unnamed sources familiar with the companies involved.

America Móvil has operations in 17 countries in the Americas and the Caribbean. If Mr Slim is successful in acquiring Datacom, it would be the company's first move into high-growth Asian markets. India is the world's fastest-growing mobile market, with four new national mobile operators emerging following a license auction in January. A fifth company was licensed to operate across two-thirds of the country's 22 separate telecommunications regions.

All the new companies are owned by Indian business groups with no prior experience in telecommunications. At least two have made clear their willingness to be acquired by an international partner. Unitech, an Indian construction conglomerate, has announced it will identify a strategic international partner for a 25 to 35 per cent minority investment in its new network within three months. Datacom is owned by Videocon, a diversified electronics group best known for manufacturing televisions. The company is being eyed by cash-rich global operators including Etisalat, America Móvil, Turkey's Turkcell and France Telecom.

None of these international suitors have said what they are prepared to pay for Datacom, but industry watchers estimate it would exceed US$3 billion (Dh11bn). Advisors from the investment bank Morgan Stanley have been helping Datacom get the best possible deal, both financially and strategically. The company, which has yet to launch national operations, would need to invest billions of dollars building a mobile network to cover just a fraction of India's 1.3 billion people. One possible stumbling block for Datacom and other Indian operators looking for international investors is the Indian government's recent decision to allow foreign firms to bid for new mobile licenses.

Last week, it announced that licences for the new, high-speed third-generation (3G) mobile standard would be available to both local and international investors. This was welcome news to Etisalat, which has previously voiced its preference for building a new network from the ground up rather than acquiring marginal players. The Indian government has set a reserve price of $500 million for a national 3G license, and requires foreign operators to own a maximum of 74 per cent of the local company. It has also loosened restrictions on mergers and acquisitions in the sector, meaning a foreign investor could acquire both its own 3G license as well as an existing operator such as Datacom.

New telecommunications licenses in high-growth markets are becoming a rarity, with the majority of countries in the Middle East and Africa, a previously booming region for new networks, now home to a minimum of three operators. India is one of the few growth markets left in the world where a number of opportunities still exist for new foreign networks. Etisalat's chairman, Mohamed Omran, has previously said he hoped to see the company close a deal for an Indian network by the end of the summer, and that the company had at least $4bn to spend on the acquisition. @email:[e-mail]