Etisalat to buy 49% in Swan, Tel Italia as much in Unitech

Unperturbed by the ongoing upheaval in the financial world, two global telecom majors – the UAE-based Etisalat and Italy-based Telecom Italia – are set to acquire 49 per cent stake each in new generation telecom operators – Swan Telecom and Unitech Telecom, respectively.

Sources said that Etisalat has reached an agreement to pick up 49 per cent stake in Swan Telecom for around $1.3 billion. “Currently, they are in the process of completing the legal documentation,” sources close to the development said. The enterprise value of the company after the deal would be around $2.7 billion, they added.

In the first phase, Etisalat would pick up a 49 per cent stake. After getting an approval from the Foreign Investment Promotion Board (FIPB), the foreign partner would increase its holding to 51 per cent, sources said.

In the case of Unitech, Telecom Italia has agreed to pick up a 49 per cent stake for around $1.75 billion. The transaction would value Unitech’s telecom venture at $3.6 billion, or Rs 16,000 crore, investment banking sources said.

At this price, the value of Unitech’s holding in the proposed investment ventures would be around Rs 8,250 crore, which is 40 per cent of the company’s total market capitalisation of Rs 20,500 crore.

Unitech has given mandate to UBS Investment Bank, while Swan Telecom has appointed Deutsche Investment Bank for the respective deals.

Mumbai-based Swan has received licences to operate in 13 telecom circles. The company is promoted by Dynamix Balwas Group, a Mumbai-based real estate developer.

Etisalat plans to expand in India and has been in talks with various licensees for stake sale. It operates in the UAE, Africa, and Asia including Pakistan, Egypt and Saudi Arabia. Etisalat’s 2007 revenues stood at $5.8 billion and the company has a global subscriber base of 63 million.

Telecom Italia completed the due diligence last week. The broad term and condition has been finalised. The sources said that it would take a couple of weeks to conclude the deal. Unitech was also in talks with Norway-based Telenor. However, the negotiation failed on the issue of valuation.

Sources in Unitech said that under the deal, the entire telecom business would be transferred to a wholly owned subsidiary of the company, which would work as the holding company for group telecom ventures. Funds would be utilised for rolling out telecom network and also for 3G spectrum bidding. The company has a pan-India licence for 22 telecom circles.