Reliance Communications (RCom), the country's second largest telecom company by subscribers, is in talks with various strategic players to sell a 20-26% stake. The deal in talks will be in two phases, beginning with a purchase of shares from secondary markets followed by issue of fresh shares through preferential allotment, reports Economic Times.
The funds can be used in the upcoming government auction to acquire 3G spectrum and network rollout. RCom may have to spend more than $500 million for the spectrum and shell out another $1 billion for setting up the network. RCom also has plans to buyback its foreign currency convertible bonds, which can cost upto $650 million.
There are a number of foreign telcos that are looking to enter India as it remains one of the fastest growing telecom markets in the world. Those likely to be interested are France Telecom, Deutsche Telekom and Telecom Italia. UAE's Etisalat and Norway's Telenor have recently entered Indian market by buying into Swan Telecom and Unitech Wireless respectively. Others like US-based telecom firms AT&T and Verizon may also be interested.
The talks of an RCom deal comes after Japan's NTT DoCoMo acquired a 26% stake in Tata Teleservices (TTSL) in a deal that valued the CDMA operator at around $9 billion. The report said that RCom may expect a valuation of $18-20 billion as it has double the number of subscribers compared to TTSL. This will be double the present market valuation of RCom, whose marketcap was nearly $9.5 billion on close of trading on Wednesday.
RCom and TTSL are the telecom companies which operate in India through a CDMA platform, and both the companies are planning their GSM foray. RCom may use the funds to cover the costs of setting up of the infrastructure required for its GSM launch. It has already raised $400 million from Canada's export credit agency, Export Development Canada, to purchase telecom technology and services from Canadian suppliers for GSM foray.