ATT, Indian Telcom Giant Reliance Discuss Potential Partnership
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Reliance Communications, one of the largest mobile-phone providers in India, with 106 million subscribers,
plans to sell a 26 percent stake to raise cash to cover costs that include $1.8 billion for licenses for high-speed data services.
Reliance Communications, one of the largest mobile-phone providers in India, with 106 million subscribers,
plans to sell a 26 percent stake to raise cash to cover costs that include $1.8 billion for licenses for high-speed data services.
Reliance’s board voted on Sunday to approve the sale and said in a statement that it would also look at “other appropriate combination or consolidation opportunities.”
At the market close on Friday, Reliance had a market capitalization of 347.9 billion rupees ($7.5 billion).
According to an executive briefed on the discussions, AT&T is in preliminary talks with Reliance.
Reliance is also in discussions with Etisalat, an operator in Abu Dhabi with businesses in the Middle East, Africa and Asia and operations in India,
and with investors in the MTN Group, the South African phone company,
according to the executive, who was not authorized to speak publicly because the discussions were preliminary.
An AT&T spokesman said the company would not comment on rumors or speculation.
AT&T, the exclusive carrier of the Apple iPhone in the United States, is looking outside the United States for new customers but has also been paring some international operations.
In 2005, AT&T sold a large stake in Idea Cellular, now one of India’s largest mobile companies, to its partners in that venture.
This April, AT&T said it would sell a stake in the Indian information technology company Tech Mahindra for an undisclosed amount,
and in June AT&T said it would sell off some of its Japanese business for $101 million.
Still, AT&T’s chief, Randall L. Stephenson, has made several trips to India to look for opportunities.
The company considered bidding in the recently concluded wireless spectrum auction in India, but decided against it,
perhaps for reasons we discussed in an earlier ITN item regarding the dynamic Indian telecom market.
AT&T appears to be drawn by India’s growing base of cellphone users — the 601 million mobile subscribers are the most outside China.
New customers signed up at a rate of 17 million a month in April as operators pushed into rural areas and cut rates.
In spite of that heady growth, profits are under pressure because of intense competition between 12 to 13 phone companies, depending on the region.
Stiff competition has driven prices down to less than a penny a minute for local calls, and many analysts predict the country’s telecommunications operators will be forced to merge.
“AT&T has been dealt an unsatisfying set of cards. Its wired business is in unrelenting decline, and there’s not much growth left to be had in U.S. wireless anymore,”
said Craig Moffett, a telecommunications analyst at Sanford C. Bernstein & Company, in this article from the New York Times.
“Emerging markets offer the tantalizing prospect of growth.
“Unfortunately, India is a hyper-competitive market where profits have been exceedingly hard to come by.”
Foreign investors attracted to India have not reaped rewards.
After paying $11 billion for a stake in an Indian telecommunications company three years ago, Vodafone of Britain wrote down the investment this year by more than 25 percent.
Vodafone is still involved in a multibillion-dollar dispute with Indian tax authorities over the deal.
For Reliance, an investor like AT&T would provide valuable cash as it prepares to invest in new high-speed data technology and expands a new GSM network that is different from its original CDMA system.
Last month, the company bid $1.8 billion for airwaves designated for high-speed, 3G wireless services.
In its most recently concluded quarter, Reliance Communications profits fell 16 percent, even as the company’s subscriber base increased 9 percent.
Reliance has thousands of business customers as well as the mobile operations, controls 60,000 telecom towers and runs undersea cables that transmit data and calls around the world.
