Telecom Italia May Pip Telenor For Stake In Unitech Arm

By Pallavi S

  • 18 Sep 2008

Telecom Italia appears to have pipped Norway's Telenor to acquire 49% stake in Unitech's telecom arm. The telecom firm is now in an advanced stage of negotiations to pick the stake for around $2 billion valuing the startup at around $4 billion, the Economic Times reported on Thursday.

What seems to have clinched the deal for the Italian operator is that it agreed to having a minority stake in the firm as Unitech was not inclined to give away controlling stake. In contrast, Telenor and the Middle East telco Zain were looking to have a majority stake in the venture. An earlier report had hinted that Telenor is talking to pick up a 26% stake in Unitech's telecom venture for around $500 million (Rs 2,200 crore) valuing the firm at around $2 billion.

Unitech, which negotiated with several foreign telecom players including AT&T, Etisalat and Altimo, took over six months to finalise an equity partner. Now that Telecom Italia is the most likely partner, Unitech can speed up its roll out plan.

As per the arrangement, Unitech telecom business will be transferred to a new company in which Telecom Italia will invest $2 billion for 49% stake. The majority 51% in the joint venture company will be held by Unitech. Unitech's equity contribution will be in the form of its pan-India licences to operate in all 22 telecom circles. The new firm will issue fresh shares to Telecom Italia.

The funds will be used for laying down the network, rolling out operations as well as bidding for 3G spectrum. Telecom Italia team has been accompanying Unitech executives to meet the equipment vendors. Unitech has hired 250 people for its telecom venture and plans to roll out services by April next year.

The company has received spectrum for six circles and it expects to invest Rs 20,000 crore($4.5 billion) in its telecom business over the next three years. It recently raised Rs 1,200 crore for its telecom venture from a syndicate of public sector banks led by PNB and Canara Bank.

For Telecom Italia, this would be the second big move into the emerging market. The firm which  reported revenues of  € 38.9 billion in 2007, also owns a stake in Telecom Argentina in Argentina. It had been looking for a foothold in an emerging market like India, which can give its business a big boost.

It operates landline telephone services in Italy, GSM mobile phone services in Italy and Brazil under the name TIM, and DSL internet and telephony services under the brand Alice in Italy, Germany, France, San Marino and the Netherlands. Its subsidiary Telecom Italia Media also controls three Italian TV networks: La7, MTV Italy, and QOOB.

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