ABU DHABI/MUMBAI (Reuters) - Abu Dhabi's Etisalat could decide within weeks whether to take a stake in an Indian telecoms operator, its chairman said on Wednesday, after a newspaper said it was in talks with Reliance Communications (RCOM.NS : 154.85 +16).
Shares in Reliance rose as much as 10 percent after the earlier newspaper report said Etisalat, which is the Gulf region's biggest provider of telecoms services by market capitalisation, was in advanced talks to buy a quarter of the Indian cellular operator for 180 billion rupees ($3.8 billion).
"We are talking to several Indian operators and are evaluating several Indian operators but have not reached a final decision," Mohammad Omran, chairman of Etisalat, also known as Emirates Telecommunications Corp, told Reuters.
Omran declined to comment specifically about the Reliance report and said that Etisalat had not taken any final decisions. "It may take a few weeks or it may take a few months," he said.
A day earlier another media report linked Reliance Communications to possible tie-up talks with South Africa's MTN.
A person close to the Indian firm who declined to be identified said both reports were speculation.
Reliance Communications is controlled by billionaire Anil Ambani, who recently ended an agreement not to compete in businesses with his long-estranged brother Mukesh, freeing him to bring outside investors into India's second biggest mobile operator.
That surprise announcement has prompted market speculation about the plans of both brothers now that their conglomerates are free to compete on each other's turf.
Two years ago Mukesh Ambani thwarted a planned tie-up between Reliance and South Africa's MTN by asserting a right of first refusal on the Indian carrier's shares.
If a deal is finalised Etisalat would make an open offer to acquire an additional 20 percent stake in Reliance Communications from the public, the Times of India said on Wednesday, citing market sources.
The equity capital of Reliance would expand by 25 percent if a deal is done and would reduce the stake of Anil Ambani to about 55 percent from 67.58 percent, the paper said.
A Reliance Communications official declined to comment.
CONSOLIDATION PRESSURE
India's cellphone market is fiercely competitive, with 15 operators locked in a price war that has destroyed margins and prompted talk of consolidation.
"We think the Indian market is ready for consolidation," Omran said.
A recent auction of third-generation network radio spectrum was far more costly than expected, with Reliance Communications forking out about $1.8 billion for its licences.
Indian carriers are expected to spend billions more dollars building 3G networks.
Reliance Communications shares gave up some of their early gains and traded at 142.30 rupees, up 6.3 percent, at mid-morning.
Etisalat already has a stake in an Indian mobile venture, Etisalat DB Telecom, which launched operations in March.
Indian rules prohibit a company from holding a more than 10 percent stake in two operators competing in the same telecom zone, which might force Etisalat either to sell its holding in the startup or merge it with Reliance Communications.
India's telecoms regulator in May recommended ending the restrictions on companies selling out, a move, once accepted by the government, would help paving the way for consolidation in the world's fastest growing mobile services market.
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