The Indian government’s relaxation of foreign ownership rules is likely to spark a wave of deals in the telecoms sector, in particular a potential $2bn move by Vodafone to increase its stake in its Indian subsidiary. It is SingTel of Singapore which has leapt first however, becoming the first foreign firm to apply for 100% control of an Indian operator.
The company has submitted an application to India’s Foreign Investment Promotion Board (FIPB) to buy out the local partners in its SingTel Global (India) unit, which has licences to provide long distance and international telephone services. SingTel currently owns 74%, the maximum allowed until the rules were changed earlier this year. Other shareholders are Bharti Airtel’s holding company Bharti Enterprises and Leela India. SingTel is also the biggest shareholder in Airtel, India’s largest cellco and also a major force in Africa.
Vodafone is expected to bid for full ownership of its Indian arm, and could invest about $2bn to do that. It has focused its growth strategy on two key elements ‘ higher value services, including quad play, in Europe, and expansion in India, Africa and other emerging markets. It will soon be flush with cash from its sale of its 45% stake in Verizon Wireless, but could also face takeover bids of its own, possibly from AT&T, some analysts believe.
Also in India, the only nationwide owner of BWA (broadband wireless access) spectrum, Reliance Jio Infocomm, has been granted a Unified Licence. This will allow it to offer fully mobile broadband as well as voice on its TD-LTE network, which is likely to be the biggest deployment of this technology outside China next year.
So far, only Bharti Airtel is offering commercial TD-LTE services, and it only holds regional licences. Now that Reliance can provide a full set of services, it will be in a better position to compete with Airtel and other regional holders of BWA spectrum, and to derive maximum value from its spectrum investment, which it made via the takeover of WISP Infocomm. This should kickstart its 4G roll-out during 2014.
According to the Business Today newspaper, Reliance made its application in August and will now have to pay a one-time fee of INR16.73bn ($273m) as well as a performance bank guarantee (INR2.2bn) and a financial bank guarantee (INR440m). The new licence will then replace its current, more limited, Internet Service Provider Licence.
Reliance has not yet given a date for its launch, and faces the challenge of being a new entrant, competing with operators with established sites and infrastructure. It improved its cost base when it signed a deal earlier this year to share towers with cellco Reliance Communications (RCom). The Reliance group split acrimoniously in 2005, with the two resulting firms controlled by brothers Mukesh and Anil Ambani and Reliance Jio (then Infotel) quitting the telco space, where it had previously offered CDMA services. Thawing relations and the end of a non-compete agreement in 2010 helped pave the wave for Jio’s re-entry into telecoms and there are persistent rumors of a deeper deal with RCom, such as full network or spectrum sharing.