US telecom giant AT&T is inching closer to buying Malaysian operator Maxis Communications’ 74% stake in Aircel. AT&T, which is seeking to re-enter the world’s fastest-growing cellular market, has valued Aircel at $5-6 billion, sources told ET.

“At the upper end, the ticket price includes a control premium of around 30%, which AT&T is expected to pay to Maxis for taking management control in the company,” said sources.

AT&T, meanwhile, has halted negotiations with new operators, including Videocon-promoted Datacom and Unitech, as Maxis is believed to have shown interest in selling out. Since February, AT&T has been scouting for an Indian partner to offer cellular services in the market.

Maxis has an overall equity interest of 74% in Aircel. While it holds 65% directly, its joint venture company with the Apollo Group’s Reddy family holds the remaining 35%. When the deal was executed in January 2006, Aircel was valued at $1.08 billion. Maxis invested around $750 million for the stake at that time.

“Today, Maxis’ 74% stake is valued at nearly $4.5 billion at the top end. In two-and-a-half years, there has been a six-fold increase in the value of their investment. It is a good opportunity for Maxis to cash out,” an analyst told ET.

Maxis CEO Sandip Das declined comment. An email to AT&T went unanswered.

With India likely to opt for global auction of spectrum for 3G services, local operators will need deep pockets to be able to bid. “In such a scenario, a strong player like AT&T will prove to be a long-term partner,” the analyst added.

AT&T has received national and international long distance (NLD and ILD) licences in India. It needs an Indian partner to enter the mobile services space as FDI guidelines restrict foreign ownership in Indian telecom operators to 74%. AT&T’s India move is in line with its global strategy of focusing and expanding the wireless business while shrinking the traditional landline business.

AT&T, which is rapidly expanding its mobility business, quit India after selling its 33% stake in Idea Cellular following its merger with Cingular Wireless. It had received around $250 million for its stake, which is now valued at nearly $3 billion.

The Indian telecom sector has seen massive growth since then, with the cellular subscriber base crossing 270 million. With telecom penetration at around 25%, there is enough room for growth. Aircel has nearly 12 million subscribers in 10 circles.

It has also received start-up spectrum in the rest of the 13 circles and will be a pan-India player by the year-end, joining the league of Bharti Airtel and Reliance Communications. “Aircel has spectrum across India, has a brand name and is readying to launch services in new circles. It is in an advantageous position vis-a-vis new players as they are yet to get off the ground,” the analyst added.

Aircel, which has invested over $2 billion in operations till now, has 6,000 base stations. Its revenues for last fiscal stood at $500 million and the company aims to double this figure to join the $1-billion club this year.
It has announced capex of $4 billion. However, Aircel has not revealed how it plans to raise funds for the expansion.

Source:economictimes