French communications group Vivendi has denied a report that it is in talks with Indian telco Reliance Communications to buy a 26% stake.
This comes after a report in today’s Economic Times of India said the group was in “an advanced stage” with the Anil…
French communications group Vivendi has denied a report that it is in talks with Indian telco Reliance Communications to buy a 26% stake.
This comes after a report in today’s Economic Times of India said the group was in “an advanced stage” with the Anil Ambani owned group.
According to a direct source cited by the Indian newspaper, top brass representing the French group was in Mumbai last week to iron out the details of a possible stake purchase.
A second source agreed that Vivendi was in the lead, over UAE based Etisalat, which is also reportedly interested in the stake. A Vivendi deal would be less complex since it holds no other stakes in Indian operators, unlike Etisalat, which owns a 35% of Etisalat DB, previously known as Swan Telecom.
Indian law states that no company can own more than 10% of any two operators.
Despite this, a source familiar with both companies told TelecomFinance earlier this month “I would not discount the possibility of Etisalat bidding for Reliance as they may have come to the conclusion that it would be better to go in with Reliance than to try and succeed in India on its own.”
Any buyer would under Indian stock exchange rules guidelines reportedly need to make a subsequent open offer for a further 20% of Reliance.
Vivendi is reportedly being advised on its Indian strategy by AT Kearney.
The company’s emerging markets presence spans Morocco and Brazil, where last year it bought paid US$4.18bn for fixed-line telco GVT. After selling a 20% stake in US media group NBC Universal to GE for US$5.8bn, it announced plans to increase its exposure to emerging markets from the current 15% of revenue to 24%.
It had also been interested in Zain’s African assets, as well as Indian new entrant telco Videocon.
Chairman Jean-Bernard Levy has been cited describing the Indian telecoms market as “very exciting”, but overcrowded and expensive.
To pay down its debt, Reliance has also announced it will convert towers business Reliance Infratel into a standalone company.
One of the sources cited by the Economic Times said that an Infratel transaction would predate the sale of the stake in the parent company. Crown Castle International/Blackstone, GTL Infrastructure and American Tower Corp have reportedly begun talks with to buy the unit.
South Africa’s MTN has denied its reported interest in the Reliance 26% stake, as has American giant AT&T.
Reliance, which paid out around US$1.8bn for 3G spectrum licences in May, has some problems. A banker told TelecomFinance: “Its valuation has fallen by basically half in the last year, it has the largest debt pile of all the Indian operators (3.7x EBITDA), there are issues with the regulator and the switchover from CDMA technology will not be cheap”.