UAE?s telecom major Etisalat is planning to increase stake in its Indian joint venture Etisalaat DB to 50% from the current 45%. Currently, Etisalat DB, which was formerly known as Swan Telecom, has a foreign investment of 49% ?44.73% by Etisalat and 4.27% by Delphi Investments Ltd. This would go up to 54.25%.
The company has applied for raising the stake to the Foreign Investment Promotion Board (FIPB) as foreign direct investment beyond 49% in the telecom sector needs government?s approval. Though the department of industrial policy and promotion (DIPP) has cleared the proposal, FIPB has deferred it, citing security concerns.
Etisalat in 2008 had acquired 45% stake in Swan Telecom for $900 million or Rs 4,500 crore thus valuing the company at $2 billion or Rs 10,000 crore. Swan Telecom was amongst the eight new licensees who were granted Unified Access Service Licence in 2008 in a controversial manner. Swan currently has licences to operate in 13 of the 22 pan-India circles. While it is not known for how much Etisalat would acquire the additional stake, analysts maintain that it would not be for a premium. The reason being that with intense tariff war in the country among mobile operators, market cap of major mobile firms have got dented, thus reducing valuations.
Etisalat DB shortly plans to start operations in the country.
Once the Etisalat proposal gets government nod, it would be the second new licensee after Unitech Wireless in which the foreign partner has increased stake. The world?s seventh largest telecom operator, Telenor in 2008 had acquired 60% stake in Unitech Wireless for Rs 6,120 crore thus valuing the company at Rs 10,00 crore. The Nordic operator, however later increased its stake in the company to 67.25% for the same amount of investment thus resulting in a fall in the valuation of Unitech Wireless.