Bharti’s Chairman Grows More Confident of MTN Deal

From http://online.wsj.com/article/SB125084972837849039.html?mod=rss_india_news on August 24, 2009

By COSTAS PARIS

Bharti Airtel Ltd. Chairman and Managing Director Sunil Mittal said the second extension to talks with MTN Group Ltd. of South Africa signals that a deal may be worked out this time around.

“It gives us more confidence, but you never know with these things until the last moment,” Mr. Mittal said in an interview Friday.

Mr. Mittal’s comments came after Bharti and MTN extended their talks until Sept. 30 without giving a reason.

MTN and Bharti, India’s largest mobile-phone operator by subscribers, in May revived talks to create a telecommunications company with annual revenue of at least $20 billion and 200 million subscribers.

People familiar with the situation said Friday that Bharti and MTN have extended their talks to settle differences on pricing and the makeup of the combined entity’s board. The two companies have described their prospective deal as a $23 billion merger.

Mr. Mittal said he wasn’t in a position to confirm or deny whether Bharti would sweeten its offer.

A second person said MTN’s management and some shareholders are asking for an additional $1 billion from Bharti to complete the deal.

The person said there will be more clarity when MTN releases its half-year earnings on Thursday.

The basic terms announced in May would see Bharti accumulate a 49% stake in MTN, buying a stake directly for cash and newly issued global depository receipts, plus receiving MTN shares as part of the swap.

MTN would buy a 25% stake in Bharti for $2.9 billion in cash plus new shares, while stock received by its shareholders would take its stake in Bharti to about 36%.

Unitech unit to launch mobile svcs in Dec qtr- Telecom-News By Industry-News-The Economic Times

Unitech unit to launch mobile svcs in Dec qtr

via Unitech unit to launch mobile svcs in Dec qtr- Telecom-News By Industry-News-The Economic Times on June 16, 2009

NEW DELHI: The telecoms unit of Indian developer Unitech Ltd will launch mobile services with Norway’s Telenor in the December quarter this year, Unitech Ltd’s managing director said on Tuesday.

Unitech Wireless, in which Telenor is taking a 67 percent stake, has got wireless spectrum in 21 service areas, excluding Delhi, in the world’s fastest growing wireless market, Sanjay Chandra told reporters.

Datacom row ends as Nahata agrees to sell stake to Dhoots

15 Jun 2009, 0040 hrs IST, Chaitali Chakravarty & Joji Thomas Philip, ET Bureau

NEW DELHI: Mahendra Nahata of Himachal Futuristic Communications (HFCL) has finally agreed to sell his 36% stake in telecom service provider Datacom Solutions to the Dhoots of the Videocon Group to end a year-long corporate battle that had spilt over to lenders, regulators and even potential foreign investors, two people familiar with the negotiations said.

The Dhoot family, which owns a 64% in Datacom, is already negotiating with a European company to pick up a strategic stake in the company to bankroll its pan-India rollout plans, a person familiar with the settlement said on condition of anonymity.

While Mr Nahata’s 36% stake is valued at around $300 million (about Rs 1,422 crore), the HFCL chairman will not get this payment immediately, top executives said. As of now, the Dhoots had paid Mr Nahata a ‘token payment’ and the remaining would be paid in tranches, they added.

Datacom, which had got licences to offer telecom services in all circles in India except Punjab early last year, has yet to start operations mostly due to the standoff between its two partners.

Both Mr Nahata and Mr Dhoot denied that any such deal has taken place.

Mr Nahata said that talks of any settlement between the two partners of Datacom were baseless, adding that he would continue to remain a stakeholder in the telco. Similarly, Videocon group chairman VN Dhoot, in reply to an email query, said: “There is no question of shareholding changes or settlements or payouts between the two parties.”

A person familiar with the deal said that it is likely to involve a merger of HFCL Infotel’s telecom operations in Punjab with Datacom.

But Mr Nahata will not get any additional cash consideration for HFCL Infotel, as its debt of more than Rs 400 crore will be transferred to the books of Datacom.

Mr Dhoot denied this too. “It is denied that any deal involving HFCL Infotel’s telecom operations in Punjab being merged with Datacom has taken place with Mr Mahendra Nahata,” he said.

He said Datacom has engaged Morgan Stanley to find a strategic partner, but refused to name any likely foreign partner due to the non-disclosure clause with Morgan Stanley.

The negotiations between Mr Nahata and the Dhoots had been deadlocked for close to 15 months with Mr Nahata demanding Rs 2,116 crore for his stake.

Last year, he had rejected an offer by the Dhoots to buy him out for Rs 1,360 crore. The valuations of telecom companies, which got licences last year, have crashed over the past nine months.

Datacom, which commanded a valuation of nearly $3 billion in early 2008, is now valued by analysts at around $1 billion. It had announced that it would begin operations in Chennai by August 2008, but the deadline was postponed to December 2008.

The company failed to meet this too. The standoff between the partners had also resulted in several potential international investors refusing to buy into the company.

UAE’s Etisalat held several rounds of talks with Datacom, but eventually picked up 45% stake in another new telco Swan for $900 million.

Some foreign telcos had even set a pre-condition that they would only invest in Datacom after both the warring stakeholders exit the firm.

The foreign telcos then wanted to bring in their own Indian partner to hold 26% in the telco. Indian regulations allow 74% foreign direct investment in the telecom sector.

MTN may take GDR route for 25% stake in Bharti Airtel

15 Jun 2009, 0014 hrs IST, Joji Thomas Philip, ET Bureau

NEW DELHI: South African telecom major MTN’s proposed 25% stake in Bharti Airtel will be through global depository receipts (GDRs), if the plans by the two companies to mutually acquire equity to form a global cellular alliance stretching from the Cape of Good Hope to the Indian Ocean goes through.

A top Airtel executive involved in talks with MTN told ET that the GDRs will be listed on the Johannesburg Stock Exchange, shedding more light into the complex nature of the deal, which is set to test the new foreign direct investment (FDI) norms earlier this year.

This puts to rest all speculation regarding the deal and implies that the entire equity expansion of Bharti Airtel will be in the form of GDRs issued to MTN and its shareholders. According to the existing plan, MTN will buy a 25% stake in Bharti, while another 11% will be held directly by MTN shareholders.

Bharti, in turn, will acquire a 49% stake in MTN through a complex stock-and-cash deal. The size of the deal is estimated to be worth over $23 billion and both companies had agreed to hold exclusive talks with each other till July 31, 2009. The new company will have revenues of about $20 billion and over 200 million subscribers.

The GDR route scotches the speculation about Bharti Telecom, the unlisted holding company of Bharti Airtel, issuing fresh equity to MTN to give the South African telco a 25% economic interest in India’s largest mobile company. Bharti Telecom holds 45.3% stake in Bharti Airtel, and it was assumed that the deal would see MTN taking about 10% stake at Bharti Telecom with the issue of new shares to MTN.

Additionally, along with a stake in Bharti Airtel’s holding company, it was assumed that MTN and its shareholders would also be offered a combination of equity shares, convertible instruments, warrants at Bharti Airtel under a Scheme of Arrangement. Another model that was speculated about involved Bharti and its promoters including SingTel floating a special purpose vehicle (76:24 or 51:49) for the deal.

The new foreign holding norms give enough headroom for Bharti to route MTN’s entire holdings in it through GDRs on an expanded equity base. This is because, new FDI norms, notified under Press Notes 2, 3 and 4 by the previous UPA government, considers a company Indian-owned if Indian promoters hold a majority stake in it, and the investments made by such companies in any JV or downstream venture are also treated as Indian.

Hence Bharti Airtel, which had close to 70% foreign equity stake as per the old guidelines — where ‘beneficial ownership’ is interpreted to include indirect holding — has only close to 43% FDI under the new norms. This is because a significant part of SingTel’s 31% holding in Bharti Airtel as well as Vodafone’s entire stake are routed through majority-owned Indian companies.

Related stories at

• http://www.hindustantimes.com/StoryPage/StoryPage.aspx?sectionName=RSSFeed-Business&id=a45dfe22-9c89-4875-90fd-8b05cd3cbde8&Headline=MTN+may+take+Bharti+stake+through+GDRs

France Telecom & Telstra in talks with Maxis to buy minority stake in Aircel

10 Jun 2009, 0047 hrs IST, Rashmi Pratap & Boby Kurian, ET Bureau

MUMBAI | BANGALORE: France Telecom and Telstra of Australia are in talks with Malaysia’s Maxis Communication to buy a minority stake in Indian telecom operator Aircel, in yet another sign that the ongoing slowdown and credit crunch are having a negligible impact on deal activity in the telecom sector.

The talks between the two overseas players and Maxis revolve around France Tele buying a 20-25% stake in Aircel, a dominant player in Chennai and Tamil Nadu. Aircel, which is one of the major regional players in India, is in the midst of a $5-billion expansion plan that will see it becoming a pan-India player.

Meanwhile, Saudi Telecom, which owns 25% in Aircel parent Maxis, is likely to increase its stake in the company to 35% for about $1 billion. The money from the sale of Maxis’ stake will also be used to invest in Aircel. Goldman Sachs is advising Saudi Telecom in its transaction with Maxis. The deal with Saudi Telecom is expected to be completed within a month.

Estimates of the valuation of Aircel, which has a subscriber base of 19.6 million, vary between $7 billion and $8 billion. France Tele, which is not looking to buy a majority stake, will end up paying about $1.4-2 billion if the deal goes through at this valuation, people close to the development said.

The Indian telecom sector is perhaps one of the few sectors in the economy that is still witnessing strong M&A deal activity despite an economic slowdown. In the past 10 months, about $5 billion of deals have been concluded, including a mega $2.7-billion transaction that saw Japanese giant NTT DoCoMo buying 26% in Tata Teleservices.

Indian telecom companies, too, are growing at a scorching pace with monthly subscriber additions rising to more than 10 million a month. At this rate, Indian subscriber base is expected to leap past the 500 million mark in double quick time.

Aircel on course to widen pan-India reach by June 2010

The continued high growth is of great interest to foreign investors. Impending developments such as auction of spectrum for 3G (third generation) and broadband wireless access (BWA), besides the entry of MVNOs (mobile virtual network operators), offer further growth opportunities,” said Salil Pitale, head (telecom & media), at Enam Investment Banking.

For France Telecom, Europe’s third-largest phone company which owns the Orange brand, it will be an opportunity to re-enter the world’s fastest growing telecom as it faces a slowdown in its home turf and in other mature markets.

In response to an e-mail, an Aircel spokesperson said, “We are not aware of any discussions with France Telecom about this matter. Maxis Communications and its partners remain firmly committed to the accelerated growth and development of Aircel to be a successful pan-India operator.” A France Telecom spokesperson said, “We do not comment on market rumours.”

France Telecom first approached Maxis in August last year, just before the global market meltdown. “At that time, it was also in talks with Tata Teleservices (TTSL). Negotiations with Maxis were revived after NTT DoCoMo clinched the deal with TTSL,” a person familiar with the discussions told ET.

Maxis was also in talks with AT&T last year for selling a similar stake, but the deal could not go through because of differences in valuation. Talks between France Tele are still at a preliminary stage and the deal may also fall through because of Maxis’ insistence that the prospective investor also purchase a small stake from Maxis. France Tele, on the other hand, wants the investment to go into the company, that is Aircel, and is not keen on buying directly from Maxis.

Maxis owns 74% in Aircel while the rest is held by Chennai-based Reddy family, promoters of Apollo Hospitals. France Tele had held a stake in Mumbai-based BPL Mobile for many years before exiting in 2003. In 2007, its group company Orange Business Services acquired GTL’s enterprise and managed services division. Subsequently, it bagged NLD and ILD licences in India. A stake in a mobile firm now will complete France Telecom’s India story.

Aircel is currently in a money-guzzling mode, with the target to complete pan-India footprint by June next year. Ananda Krishnan, the owner of Maxis, also needs money to pump into Natrindo Telepon Seluler, a telecom firm in Indonesia which has a 3G licence. Plus, he bought out NTT DoCoMo from Sri Lanka Telecom in 2007 and that business also requires continued investments.

In a bid to fund these plans, Ananda delisted Maxis in June 2007 in a $12-billion deal and within days, he sold 25% of it to Saudi Telecom for over $3 billion. Due to this, Saudi Telecom has an effective 18.5% stake in Aircel. Dilution of another 25% in Aircel will help Ananda’s Maxis raise around $2 billion at a time when global credit scenario is not very positive.

At the same time, India’s telecom growth story continues to attract international investor interest, with all the major telcos making a beeline for India. This is despite the presence of 12 players and entry of four more telcos later this year. For Ananda, stake sale could be an opportunity to raise money without giving any controlling rights.

Low-profile billionaire Ananda Krishnan, whose business empire stretches from telecom and media to power and construction, is known for buying and selling businesses. In May last year, he sold Excel, the giant exhibition venue in London’s Docklands, for around $230 million, to a group backed by the crown prince of Abu Dhabi. He then bought a 20% stake in British regional newspaper chain Johnston Press and is widely believed to be interested in setting up a global media empire.

BSNL staff union open to discussing IPO plans

Thomas K Thomas on The Hindu Business Line on June 5, 2009

New Delhi, June 4 In what could be a softening of stance, the employees union of Bharat Sanchar Nigam Ltd said that it was prepared to discuss the company’s proposal for an Initial Public Offering.

While the union maintained that it was still opposed to the idea of listing BSNL’s shares on stock exchanges through an IPO, its officials said that they were prepared to hear what the management and the Communications Ministry had to offer.

Speaking to Business Line, Mr V. A. N. Namboodiri, General Secretary, BSNL Employees Union, said, “If they call us we are ready to discuss the IPO issue with the Government.”

Govt proposal

Asked whether the union will agree to the proposal if the Government offered them sops in terms of bettering their pay package, Mr Namboodiri said, “We have not come to that stage yet. We will hear what they have to say. So many of the promises made to us by the Government at the time of corporatising BSNL are still to be met. ”

Mr Namboodiri, however, categorically said that there was no change in the union’s stance on the proposed IPO and it would strongly oppose the move. But sources said that the union may push hard some of its long-standing demands related to higher pay, promotion, absorption, allowances, giving ‘maharatna’ status to the PSU, pension and employees stock option. The union may also seek assurances on paper from the Government about the employees’ job status.

Asked why the union was opposing the proposed listing, Mr Namboodiri said, “Look at MTNL, which got listed much earlier. It does not have money to even pay the salaries. And see what has happened to VSNL. The name itself has been changed. What assurances can the Government give that we will not face the same fate after divesting BSNL’s stake,” Mr Namboodiri said.

Actual listing

While the actual listing of BSNL may still be some time away, the fact that the unions have agreed to discuss the IPO proposal could be an opening for the management to negotiate a way out.

The State-owned telecom company had approached the Government last year with a proposal to divest 10 per cent stake to the public in a bid to raise about $10 billion. The company was hoping to use the funds for its expansion. However, the plans got shelved after the unions rejected an offer from the Communications Ministry to improve emoluments. With the unions agreeing to discuss the issue again, this time the BSNL management could sweeten the deal.

Related stories at

• http://economictimes.indiatimes.com/BSNL-may-sweeten-employee-share-issue-plan-to-win-over-trade-unions/articleshow/4629192.cms

Excerpt from above:

With a revised offer, BSNL is hopeful of a breakthrough, as the management is confident that a large number of employees and the smaller unions are open to negotiate on the stock offer. In a bid to win over some of the employee unions, BSNL is also likely to widen the scope of the discussions related to the listings to include other issues, such as long-pending employee demands for higher wages, allowances, promotions and other benefits in line with private sector companies.

Besides, the BSNL management may also ask the Centre to give the company ‘maharatna’ status, which the unions have been demanding for over a decade now. According to ministry officials, the Centre may also take a leaf out from a Danish government strategy and use a portion of the proceeds toward employee pension funds and for training and re-deployment of a huge number of the PSUs employees.

The government may announce a funding package for retraining large sections of the BSNL workforce for redeployment into new data-driven businesses, such as broadband.

A top BSNL executive said that the company had already begun informal talks with leaders of different employee unions, while adding that one of the proposals being considered was to sweeten the earlier offer. But the executive also clarified that since formal talks were yet to begin, the new offer had not been presented to the employee unions yet.

The new UPA regime is keen on BSNL’s listing, and it hopes that a 10% stake dilution in the company will fetch over Rs 40,000 crore. Mr Raja, who retained the portfolio in the new UPA administration, had recently said that he had asked BSNL’s management to hold talks with the employee unions and address the latter’s fears on listing.

Last year, Mr Raja said that BSNL would list at Rs 300-400 per share, pegging its valuation at $37-45 billion, which is not even half of the $100billion valuation that the company’s management has been claiming since January 2008.

However, a top BSNL official had then clarified to ET that this was only the bookvalue of the company and did not include its asset value. The executive also added that the minister’s figure was only to make a point that this (Rs 300- 400 per share) would be the minimum that employees can expect, when it gets listed.

FIPB pulls the plug on ByCell’s India plans

14 May 2009, 0048 hrs IST, Joji Thomas Philip & Rajat Guha, ET Bureau

NEW DELHI: The government has withdrawn its approval to little-known Swiss-registered firm ByCell to launch telecom services in India in an unprecedented move triggered by renewed security concerns about the antecedents of its main promoters.

The Foreign investment Promotion Board (FIPB), a nodal government body that clears all foreign investment proposals in India, withdrew the permission after the revenue department and the ministry of home affairs asked it to review ByCell’s application on grounds of security.

ByCell, founded by a group of Russian businessmen, was to hold 74% in the Indian telecom company with Hyderabad-based Jayalakshmi Group, which has interests in tea, tobacco, cotton yarn and power, owning the rest. Both companies had announced this joint venture in 2006.

ByCell CEO Alexandre Louzine told ET that his company had not received any information from the government or FIPB about withdrawing its clearance. “If such a decision has been made, it is a big mistake. It will damage the image of India and hurt the flow of foreign investment into the country,” he said.

“It is not a simple thing to withdraw clearances, especially after we have made considerable investments here. Besides, the Indian government has also collected fees from us for our telecom licence,” said Mr Louzine, adding that the company had offered detailed clarifications to all queries raised by both the home ministry and FIPB.

FIPB had previously cleared ByCell’s application twice over the past two years, but the government had held up the formal issue of licences to the company citing one reason or the another.

ET had first reported in its edition dated May 13 that the MHA and the revenue department had sought that FIPB review the clearance it has given to ByCell to launch telecom operations in India.

The revenue department had expressed concerns to FIPB about ByCell’s shareholding structure, its source of funding and the lack of clarity about the company. It had said the company be allowed to launch operations only after it offers clarity on these issues.

ByCell already holds a letter of intent for launching mobile services in Assam, Bihar, north-eastern states, Orissa and West Bengal, but the Department of Telecom (DoT) had withheld its licence for the past 15 months over its failure to obtain a formal clearance from FIPB.

Earlier this year, FIPB had cleared ByCell’s applications, after the telco had approached the courts, alleging that its licences were being withheld despite DoT approving its application, collecting payments, bank

guarantees and even issuing letters of intent in early-2008.

In January 2006, ByCell had received FIPB approval to invest Rs 500 crore and launch mobile services in five circles (spread across 13 states). And in February 2008, following clearance from the home ministry, the company had again obtained the board’s approval to apply for telecom licences in the remaining 17 circles in the country and raise its investments in India to $500 million.