RCom, China Mobile in tie-up talks

Anil Ambani-controlled Reliance Communications (RCom) has started preliminary talks with China Mobile, the world’s largest mobile company, for a strategic alliance and possible equity participation of 5 to 6 per cent.

In February, Wang Jianzhou, China Mobile’s chairman and CEO, told Business Standard at the Mobile World Congress in Barcelona that the company was keen to expand to India. China Mobile has over 450 million subscribers.

RCom, which offers CDMA mobile telecom services and started GSM services a few months ago, has over 70 million customers.

An RCom spokesperson declined to comment and an email query to China Mobile was unanswered.

The Chinese telecom company, which is listed on the New York Stock Exchange, has operations in Pakistan, where it acquired Paktel for $460 million in 2007 and renamed the company CMPak.

It also operates mobile services in Hong Kong and recently bought a stake in Far East Tone Communications which operates mobile services in Taiwan.

RCom is expected to require cash to bid for licences for third-generation (3G) services, auctions for which are expected later this year. The reserve price for the auction has been set at a steep Rs 4,040 crore.

The company recently announced that it would like to issue equity shares to qualified institutional buyers to finance its 3G bid, expand its broadband business and bolster its financials. With a net worth of over Rs 63,000 crore, the company has cash flows of over Rs 12,000 crore.

Chinese companies, however, have been subject to security controversies, especially those with Pakistani operations.

The government, however, recently cleared a deal between Swedish company Telenor and realtor Unitech’s telecom venture, though the former has operations in Pakistan.

The government also cleared another Chinese company, Huawei Technologies, which won a contract to supply GSM equipment to state-owned Bharat Sanchar Nigam Ltd in south India.

Many Indian telecom companies have been looking stakes and strategic alliances with international companies. For instance, Bharti Airtel, India’s largest private telecom service provider, recently signed an agreement to explore a global alliance with South Africa’s MTN ahead of an eventual merger.

Tata Teleservices recently sold 26 per cent to Japan’s NTT DoCoMo which is playing a key role in its launch of GSM services.

Last year, new entrant Swan Telecom sold 45 per cent to UAE-based Etisalat for close to $900 million and Unitech Wireless, with 22 circles, sold 60 per cent to Telenor for Rs 6,120 crore.