State-owned telecom firms BSNL and MTNL have categorically rejected the proposal by little-known Indian firm, the Vavasi group, to partner it in a consortium to acquire 46% stake in Kuwaiti telecom company Zain.
An FE investigation revealed that a couple of months back, the Vavasi group had approached officials in the department of telecommunications (DoT) with their proposal.
The DoT had referred the matter to the two public sctor undertakings, which later formed a committee to examine the proposal.
Officials from the two firms told FE that the joint committee rejected Vavasi?s proposal as they found that the company?s equity base was only Rs 5 lakh. ?How can a company with an equity base of Rs 5 lakh ($10,000) get into a deal estimated to be around $14 billion?? an official said.
On Wednesday, the two telecom firms had jointly stated, ?MTNL and BSNL would like to clarify that no view has been taken regarding participation in the said consortium. However, MTNL and BSNL are always on the look out to explore all types of overseas business opportunities to expand their operations.?
Sources said the reason why the two firms had examined the proposal by Vavasi to be a part of the consortium was that they were exploring avenues to enter the overseas market, especially Africa.
Both the state-owned firms want to jointly bid abroad and since Zain has operations in Africa, the two companies decided to have a look at the proposal.
Very little is known about Vavasi group in India so far. The company had applied for a pan-India licence to offer mobile services in the country. Since the application was filed on October 1, 2007, it has not been granted licence so far as only companies which had applied on or before September 25 that year have been awarded licence.
Vavasi officials had then said they own a proprietory technology for offering mobile services, which is an IP-based technology, distinct from the technology deployed by other mobile operators across the world. The company?s claim to fame in the mobile space is Mongolia where it has around 50,000 users and plans to take it up to 200,000. Apart from telecom, the group has interests in real estate, renewable energy, steel and cement. As part of the deal being discussed, Zain shareholders will sell a 46% stake to the consortium at 2 dinars ($6.97) a share. The total deal size is estimated at $13.7 billion. The Khorafi Group, Kuwait?s wealthiest family, has a 11% stake in Zain and is leading the negotiations. The state-owned Kuwait Investment Authority holds 24.6% stake.
Zain has 69.5 million customers across 24 countries in West Asia as well as in Africa.
In the past, Zain tried to sell its African assets, excluding in Morocco and Sudan, with French telecoms and media conglomerate Vivendi among the top contenders. But talks with Vivendi ended this summer.
Earlier, Vavasi MD Farid Arifuddin had said in Kuwait that there was a good fit between Zain and Indian companies, BSNL and MTNL, in the consortium. ?What we bring to the transaction is our experience, especially our prospective partners from India. They have the experience of operating in low-cost countries,? he had said.