Reliance Communications Says It's Willing to Sell 26% Stake to Investors

Reliance Communications Ltd., India’s second-largest wireless carrier, said it may sell a 26 percent stake to help pay debt and upgrade networks. AT&T Inc. is in early talks about investing in the company, the Wall Street Journal reported today, citing people familiar with the plans.

The board gave preliminary approval for the sale of the stake, valued at 90.5 billion rupees ($1.9 billion) at current market prices, to a strategic or private-equity investor, the Mumbai-based company said yesterday. Reliance, controlled by Indian billionaire Anil Ambani, didn’t identify any suitors.

Reliance Communications gained 14 percent last week in Mumbai trading after the Financial Times reported Emirates Telecommunication Corp. may buy a stake valued at $4 billion. The sale would help the Indian company purchase network equipment as it prepares to offer third-generation wireless services in the world’s second-largest mobile-phone market.

“With the kind of capital expenditure that the company would need going forward it may require an infusion of funds,” said Rahul Jain, a Mumbai-based analyst with Angel Broking Ltd., who has a “neutral” recommendation on the stock.

AT&T, which is looking to expand outside of the U.S., has been holding informal discussions with Reliance for the past few weeks, according to the Journal report. Mark Siegel, a spokesman for AT&T, declined to comment on the report.

Price Competition

Reliance paid 85.9 billion rupees to the government for 3G licenses as Indian phone operators seek to revive earnings growth by offering data services in a market where voice calls cost as little as one U.S. cent per minute.

Revenue in the nation’s mobile-phone services industry is poised to fall 22 percent for the year after declining 25 percent in 2009, according to estimates from Bank of America Corp.’s Merrill Lynch unit. Vodafone Group Plc on May 18 booked a $3.3 billion charge for its Indian unit, citing “intense” price competition.

“The competition in the Indian market is getting intense and is showing no signs of stabilizing at all,” said Jain.

At the close of trading in Mumbai on Friday, Reliance Communications was worth $7.4 billion. The stock has dropped 49 percent in the past 12 months compared with a 15 percent gain for the Bombay Stock Exchange’s benchmark Sensitive Index. Larger rival Bharti Airtel Ltd. shed 31 percent during the same period.

Various Proposals

Reliance Communications said June 2 it had received “various proposals” from overseas companies, commenting after the Times of India newspaper reported Emirates Telecommunications, known as Etisalat, was in advanced talks to buy a 25 percent stake.

Etisalat spokesman Ahmed Bin Ali said on June 2 that Indian operators were among companies being looked at for possible investment, without specifying Reliance Communications or a timeframe for any deals.

The Economic Times reported on June 1 that the Indian company may restart merger talks with South Africa’s MTN Group Ltd., after negotiations collapsed in July 2008.

Gaurav Wahi, a spokesman at Reliance, said the company doesn’t comment on speculation. Nozipho January-Bardill, a spokeswoman for MTN, said “there are definitely not any talks with Reliance.”

Reliance will sell shares at an “appropriate premium to the prevailing market price” and “examine and pursue other appropriate strategic combination or consolidation opportunities,” the company said in its statement yesterday. It didn’t provide any names of potential buyers.

To contact the reporter on this story: Saikat Chatterjee in New Delhi at schatterjee4@bloomberg.net.

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