AT&T in Talks to Re-enter Indian Cellular Market
US telecom company AT&T is in talks with Malaysia's Maxis Communications to buy out its 74% stake in Aircel, seeking a re-entry into India's booming cellular market.
"AT&T has approached Maxis with an offer to buy its 74% holding in Aircel. The talks are at a preliminary stage right now," sources told ET.
Sources said AT&T had also approached new entrants such as Videocon-promoted Datacom, Unitech, BPL Mobile's subsidiary Loop Telecom and others, who have now started receiving spectrum. While a final decision may be a few months away, its level of interest in Aircel is the highest, they added.
In response to an e-mail from ET, AT&T Asia-Pacific spokesman Greg Brutus said: "We do not comment on rumour or speculation." A Maxis spokesperson said, "Maxis remains committed to the accelerated growth and development of Aircel, to be a successful pan-Indian operator."
AT&T has already received National and International Long-Distance (NLD and ILD) licenses in India. It needs an Indian partner to make a foray into the mobile services space as FDI guidelines restrict foreign ownership in Indian telecom operators to 74%.
Aircel currently offers services in nine circles and has also received start-up spectrum in the rest of the 14 circles. It will be a pan-India player by the end of this year, joining the likes of Bharti Airtel and Reliance Communications. Aircel is also the market leader in Chennai, Tamil Nadu, Assam and North-East circles.
"Obviously, Aircel is one of the most promising players in the telecom space. It has spectrum across India, has a brand name and is readying to launch services in new circles. It is in an advantageous position vis-ý-vis other new players as they are yet to get off the mark," said an analyst.
AT&T's India move is in line with its global strategy of focusing and expanding the wireless business while shrinking the traditional landline business.
On Tuesday, it reported a net income of $3.46 billion, up from $2.85 billion in the year-ago period, boosted by business from its wireless unit. Earnings at AT&T's wireless unit almost doubled to $2.9 billion as revenue increased 18% during the first quarter of the calendar year.
AT&T, which is now rapidly expanding its mobile phone business, quit India after selling its 33% stake in Idea Cellular, following its merger with Cingular Wireless. It received around $250 million by selling the stake, which is now valued at nearly $3 billion.
The Indian telecom sector has seen a massive growth since then. Telecom penetration has reached a whopping 25% now, from just 2% three years ago, and it is not surprising that AT&T wants to make a comeback.
The analyst quoted earlier felt that Maxis may not sell at this stage unless valuations were extremely high. "India is a growth market for Maxis. It came in at the right time and it is unlikely to consider a sale at this point unless valuations are extremely high," he added.
Maxis has an overall equity interest of 74% in Aircel. While it holds a 65% stake directly, its joint venture company with the Reddy family of the Apollo group holds the remaining 35%, giving Maxis an overall equity holding of 74%.
When the deal was done in January 2006, Aircel was valued at $1.08 billion. The company could be worth nearly $3 billion now, said bankers.