Saudi Tele dials India

To get 18.5% indirect stake in Aircel via 25% Maxis buy.

Saudi Telecom Company's proposed acquisition of a 25 per cent stake in Malaysia's largest mobile operator, Maxis Communications, will enable it to gain an entry into India.

The Saudi Arabian state-controlled company will get an 18.5 per cent indirect stake in Chennai-based Aircel, India's fifth largest GSM telecom service operator. Maxis holds a 74 per cent stake in Aircel.

According to a communique issued to the Riyadh Stock Exchange, Saudi Telecom and Maxis will invest around $900 million in India. This will help Aircel expand its operations.

Aircel has 6.40 million subscribers with a market share of 4.97 per cent and operates in nine circles "" Tamil Nadu, Chennai, Himachal Pradesh, Assam, the North-East, Jammu and Kashmir, Orissa, West Bengal and Bihar. It has also received licences to operate in 14 more circles and has been waiting for allocation of spectrum to launch all-India operations

The deal is roughly structured on the lines of Egyptian company Orascom's indirect equity holding in Vodafone Essar Ltd (formerly Hutch-Essar Ltd).

Orascom had bought over 10 per cent stake in Hong-Kong based Hutchison Telecom International Ltd (HTIL), the majority shareholder in the Indian joint venture.

In Orascom's case, the deal came in for government scrutiny on the ground of national security, principally because the Egyptian company had operations in Pakistan.

"There is no need for any Foreign Investment Promotion Board clearance as there is no change in the direct equity," said a telecom department official.

Saudi Telecom has agreed to acquire the 25 per cent stake in Maxis Communications for $3.05 billion. This would also enable the company to get a 51 per cent stake in Maxis' Indonesian operations, the company said in the statement.

"Saudi Arabian companies were looking at expanding into other markets as they have to pay huge premiums for licences in the their country," said Sumit Modi, an analyst with Emkay Shares.

Aircel executives declined to comment stating that it was between Maxis and Saudi Telecom. Maxis Communications' executives in Malaysia said they did not have anything to add to the facts in the release.

Saudi Telecom is acquiring 25 per cent in Binariang GSM Sdn Bhd (Binariang), the largest stakeholder in Maxis Communications, owned by Malaysian business tycoon Ananda Krishnan.

The Saudi Telecom investment includes a $450 million subordinated debt facility, which will be matched by the existing shareholders of Binariang. Krishnan had earlier proposed to acquire a 41 per cent stake in Maxis for $4.7 billion and delist it from the Malaysian bourse.

$900 million

Will be invested by Saudi Telecom and Maxis in India

This will boost Aircel operations

$3.05 billion

Will be paid by Saudi Telecom for a 25% stake in Maxis

Through this, the company will also get a 51% stake in Maxis' Indonesian operations