Mid-cap PE fund Aureos Capital to acquire strategic minority stake in telecom firm Ordyn Technologies for $8-10 mn

Aureos Capital, a global mid-cap private equity fund managing small and medium enterprise (SME) assets worth over $600 mn worldwide, will make its third Indian investment by acquiring a strategic minority stake for $8-10 mn in Bangalore-based, six-year old telecom equipment company Ordyn Technologies. Aureos’ investment is part of Ordyn’s fund-raising to bolster its R&D. Aureos is leading the investment into the company with India Infoline pumping in another $3-4 mn (Rs. 20 crores).

Ordyn offers product line in the optical networking space, a niche area but big enough for nearly 3-4 large players. Tejas Networks is the only other Indian player in this market, competing with global players like Huawei, Febcom among others. Ordyn with a client list that include names like Reliance, Ericsson and Nokia raked in revenues of Rs. 55 crores in its first commercial year FY 2007 and hopes to cross Rs. 200 crores by FY 2009.

Ordyn intends to use the proceeds of this round of funding for scaling up its operations including increased R&D for designing next generation products and for expanding its international operations. The company currently spends Rs. 15-20 crores in R&D initiatives.

Read The Economic Times article.

Temasek, Crown Castle in talks with Tata Teleservices for stake in towers business

Singapore-based government private equity arm Temasek Holdings and wireless tower operator Crown Castle International are in talks to buy around 15% in the mobile phone towers business of Tata Teleservices Limited. Tata Teleservices is in talks with several firms about spinning off its mobile phone towers into a separate unit, part or all of which could then be sold. The tower business of Tata Teleservices has been valued at up to $1 bn. Temasek already holds nearly 10% of the company, which has more than 5000 mobile phone towers. Tata Teleservices, along with subsidiary Tata Teleservices (Maharashtra) Limited, has more than 15.5 mn subscribers in India.

Rival firm Reliance Communications Limited is spinning off its towers business into a separate unit. American Tower Corporation as well as private equity firms including Blackstone, Carlyle and Temasek have shown interest in Reliance Communications’ towers unit.

Read the article in The Economic Times.

Bennett Coleman picks up 5% stake in YOU Telecom

Bennett & Coleman Company Limited (BCCL), the holding company of the Times of India, has acquired a 5% stake in YOU Telecom India Private Limited for an undisclosed sum. YOU Telecom is India’s first ISO 9001:2000 accredited broadband company. Citigroup Venture Capital International is already an investor in YOU Telecom.

New Enterprise Associates buys 40% in HFCL Infotel for Rs. 375 crores

US-based private equity firm New Enterprise Associates (NEA) has acquired a 40% stake in HFCL Infotel for Rs. 375 crores. The deal has been signed and the transaction is likely to close in the next few weeks. The deal values HFCL Infotel at around Rs. 950 crores. HFCL Infotel offers CDMA-based wire-line, fixed wireless and mobile services in Punjab.

The Silicon Valley-based NEA has over $8.5 bn under management. It is one of the oldest and largest venture firms in the world. NEA had been scouting for buys in India and has opened an office in Bangalore and more recently, in Mumbai (read press release). In February 2006, it created an Indian arm, NEA-IndoUS Ventures with plans to invest $150-200 mn in India.

HFCL Infotel was being eyed by several PE funds wanting a slice of India’s telecom action. It is a loss-making unit of Himachal Futuristic Communications Limited (HFCL) incurred a loss of Rs. 25.6 crores during the quarter ended September 2006 and had accumulated losses of Rs. 70.25 crores, resulting in negative net worth of Rs. 8.54 crores.

The promoters now own 62% in HFCL Infotel, private corporate bodies hold just over 30% and 2.51% is held by the public. The private component is held between seven entities — Masita Capital Services, August Trading, IDBI (with the largest share with a little over 12% stake), Oriental Bank of Commerce, MKJ Enterprises, Mantu Housing Projects and Micro Management.

Read The Economic Times article.
New Enterprise Associates to buy 50% stake in HFCL Infotel

Tata Group not to exercise government call option; will hike VSNL stake via market purchase

The Tata Group will increase its stake in group company Videsh Sanchar Nigam Limited (VSNL) through market acquisitions instead of buying the government’s 26.12% residual stake in VSNL through the exercise of a call option.

The Tata Group has a combined effective shareholding of over 50% in VSNL. The government divested VSNL in 2001, with Tatas acquiring the majority stake in the company. However, the government was holding on to 26.12% stake in the company that gave it a controlling power and two nominees on its board.

Panatone Finvest (a Tata Group entity) holds 40.7% in VSNL, while Tata Sons has 8.51%, Tata Power holds 0.09% and Government of India holds 26.12%. Institutional investors and individuals hold the remaining stake in the company. The government was earlier ready to dispose of the residual stake, but had asked for a golden share in the company. A golden share means that the government would sell its 26.12 per cent stake in the company and in return ask for a single share with controlling stake. This was not acceptable to the Tatas.

Read the Business Standard article.

Vodafone buys Hutchinson-Essar for $19.3 bn

UK-based telecom giant Vodafone has made the winning bid for the 67% stake in Hutchison Essar (HEL) at an EV of $19.3 bn (Rs. 86,000 crores). This is the largest acquisition in India. Videocon has approached Essar to remain invested in Hutch with its 33% stake as the Indian partner.

Vodafone has also made similar offers to Analjit Singh and Asim Ghosh, the other existing shareholders and retain their combined stake of 12.26%. Vodafone has paid a price of around $794 per subscriber to clinch the deal. The valuation is in line with the $33 bn market capitalization of Bharti Airtel, the country’s largest private mobile services operator, and the $22 bn market capitalization of Reliance Communications, the second largest operator.

The acquisition will give Vodafone, which has over 200 mn subscribers globally, a strong presence in the fastest growing market for mobile services: Hutchison Essar has close to 24 mn customers.

In a related development, Vodafone has sold its 5.6% direct stake in Bharti Airtel to promoter Sunil Mittal for $1.6 bn. The deal was on a deferred payment basis. Vodafone will continue to hold an indirect 4.4% stake in the company, as a financial investor and will not have any representation on Bharti Airtel’s board nor any management rights.

Read The Economic Times and Business Standard articles.

BT Telecom India acquires Mumbai-based i2i Enterprises; faces regulatory challenges

BT Telecom India is acquiring Mumbai-based i2i Enterprises for an undisclosed amount. i2i is an internet protocol-based global managed network service provider. With this acquisition, BT also gets to acquire i2i’s four licenses for NLD, ILD, ISP and IP Telephony services, in addition to a 200-strong workforce and gross assets worth $22.5 mn. BT Telecom India is a JV between British Telecom and Jubilant Enpro of New Delhi,

The acquisition makes BT Telecom India’s biggest foreign global carrier. However, the acquisition faces certain regulatory challenges. BT has already signed LoIs for its own NLD / ILD licenses and also has paid up the license fees and bank guarantees. In the light of these facts, the deal attracts regulatory scrutiny on many fronts, especially guidelines that restrict a company from cross-holdings across identical licenses in same service areas, either via an equity deal or acquisition. This means a company cannot hold two ILD or NLD licenses. Also there is no known precedent of a refund of license fees to any company, implying that BT may have to forfeit Rs. 5 crores it paid as license fees along with performance and financial bank guarantees if it abandons its LoIs.

Additionally, i2i is required to seek written consent of the licensor of their NLD / ILD licenses before it either directly or indirectly assigns or transfers its licenses to a third party or enters into an agreement for sub-license and / or partnership relating to any subject matter of license to any third party. BT Telecom India management say that they will examine these issues.

Read the article in Business Standard and The Times of India.

Reliance Communications raises India’s largest FCCB issue worth $1bn

Reliance Communications (RCL) has raised $1 bn through foreign currency convertible bonds (FCCBs). This is the largest-ever FCCB issue from India and was oversubscribed 3-4 times by investors from Asia, Europe and the US. The bonds have a maturity of 5 years and would be convertible to equity shares at a 30% premium to the then prevailing market price.

The proceeds from the issue will be utilized to part-finance the company’s $2.5-bn expansion programme. The company has announced the expansion of coverage to 15,000-20,000 new towns and was proposed to be funded through a mix of internal accruals and debt.

JP Morgan and HSBC advised the firm on this FCCB issue. This is the second FCCB offering by RCL within a year. In March 2006, RCL had completed an FCCB issue to raise $500 mn. In December 2006, RCL raised $1 bn in debt from international markets. The five-year unsecured loan was facilitated by ABN-AMRO, Standard Chartered and Citibank.

Read the article in The Economic Times.

Videocon forms telecom JV with US firm Verizon

Consumer durables major Videocon’s Leo Communications is forming a JV with $88 bn US telecom giant Verizon to offer international long distance (ILD) services in India. The initial investment in the venture is estimated to be over $30 mn. Verizon will hold 74% in the JV, while the rest will be held by Videocon. Videocon is likely to be more of a financial partner in the JV and would eventually sell out in the long run.

India is a lucrative market for telecom companies and tele-density is just around 16%. The wireless business is growing very fast and the number of people calling overseas from India is rising fast every year. The annual ILD outgoing minutes from India were 2500 mn in 2005-06 and are expected to rise to 3500 mn by March 2007.

Read more on this in The Economic Times.

Holding company model suggested for BSNL, MTNL merger

A holding company model is being considered by the Department of Telecommunications (DoT) for the merger of public sector telecom companies Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL). ICICI Securities, ABN-AMRO, Rothschild, AF Ferguson and Desai & Diwanji were the consultants to the DoT.

The consortium of consultants has suggested that the holding company structure would be a “good immediate-term measure to try and achieve the benefits and synergies of a unified operation of BSNL and MTNL”. A professional management structure, with a board that includes government and industry nominees and employee-participation from of the merged companies, would ensure this model.

Read the article in Business Standard for more comments by the consultants.

SingTel keen on acquiring Vodafone’s 10% stake in Bharti

SingTel has formally conveyed its interest in Vodafone’s 10% stake in Bharti Airtel to the British company and its advisors UBS. Vodafone has initiated talks with SingTel, Singapore’s largest telecom group, to sell its 10% stake in Bharti Airtel. As per law, Vodafone would have to dilute its holding in Bharti Airtel, if it wins the $18 bn auction of Hutchison Essar. At present, SingTel owns 30.5% stake in Bharti Airtel. Bharti Airtel is India’s biggest mobile operator with more than 30 mn customers. India is the world’s fastest growing mobile market. Analysts forecast the country will have 500 mn users by 2010.

Read the article in The Economic Times article.

Tata Group ups stake in TTML by 3.5%

The Tata Group has raised its stake in Tata Teleservices Maharashtra (TTML), its publicly listed telecom company. TTML provides telecommunication services in the states of Goa and Maharashtra. The group’s holding in the company has now gone up from 65.5% to 69%. Tata Sons has picked up the unsubscribed portion of TTML’s recent rights issue, thereby increasing its stake by 11%, from 7.86% equity to 18.68%. Tata Teleservices, the Tata Group’s flagship telecom company and the single largest shareholder in Tata Teleservices Maharashtra did not subscribe to the rights issue. Consequently its holding has now decreased from 46.98% to 39%. The other group companies including Tata Power, Tata Investment Corporation and Panatone Finvest have maintained their equity stake by subscribing to the rights issue.

Of late, the Tata Group has been quite in news for such corporate moves where it has raised stake in some group companies including Tata Tea and Tata Coffee. The total indirect foreign holding in TTML would also go down as Tata Teleservices, the parent company of TTML, has foreign equity holding from Singapore government’s private equity arm Temasek Holdings. The board of TTML had approved a rights issue of the size of Rs. 491.14 crores on January 12, 2007 through an aggregate of 288.91 mn equity shares at a price of Rs. 17 per share. The date of allotment of the share was January 17, 2007.

Read The Economic Times article.

The Hinduja Group seeks management control in buying Pirelli’s stake in Telecom Italia

The Hinduja Group has made it clear that it will seek management control in Telecom Italia if it bids for Italian tyre and real estate major Pirelli’s stake in Italy’s largest telecommunications operator. Though Pirelli holds the largest block of shares in Telecom Italia, acquisition of that stake alone will not give the Hindujas majority control. However, given the widely-held structure of Telecom Italia’s shareholding, it may give them management control. Pirelli owns 80% of Telecom Italia’s holding company Olimpia, which has an 18% stake in Telecom Italia. Telecom Italia is Europe’s fifth largest telecommunications group with sales of nearly $30 bn and market capitalization of $77 bn. Back-of-the-envelope calculations put the acquisition cost for Pirelli’s stake in Olimpia at $12 bn. The race for Telecom Italia is hotting up with Sistema, the Russian billionaire industrialist Vladimir Yevtushenkov being the third to join the fray. US private equity firm Blackstone also expressed an interest in picking up a stake in Telecom Italia two months ago, and several others are expected to join the bidding bandwagon soon.

Read The Economic Times article.
Related Post: The Hinduja Group interested in majority stake in Telecom Italia

Tata Group in talks to acquire Sri Lanka’s Suntel

The Tata Group is in talks to buy out Suntel, Sri Lanka’s premier private telecom operator, through group company VSNL’s international arm, VSNL Global. VSNL Global recently bagged international long distance (ILD) and internet service provider (ISP) licenses in Sri Lanka, and is hoping to expand inorganically to become an integrated telecom player in the island nation.

If the deal is successful, Suntel will be VSNL’s third telecom service provider outside India. VSNL already has 51% stake in Neotel, South Africa’s second national operator, and is also in the process of picking up 26% in InfraCo, a new telecom network operator in South Africa.

Suntel is the largest fixed-line competitor to incumbent Sri Lanka Telecom (SLT) and has a subscriber base of about 250,000. It offers a range of voice, data, ISDN, dedicated packet solutions and internet services. Suntel is a joint venture between Swedish telecom giant Overseas Telecom, Metrocorp, Townsend of Hong Kong, National Development Bank, and International Finance Corporation (IFC), private equity arm of the World Bank Group. Suntel’s net profit for the six months to June 30 dipped by LKR 93 mn year-on-year to LKR 290 mn, while revenues virtually doubled to LKR 3.31 bn from LKR 1.96 bn a year earlier.

Read The Economic Times article.

The Hinduja Group interested in majority stake in Telecom Italia

The Hinduja Group is looking to acquiring a stake in Telecom Italia, Italy’s largest telecom company and Europe’s fifth largest telecommunications group. The group is said to be examining buying tyre maker Pirelli’s 18% stake in the Italian company.

Telecom Italia boasts of around 31 mn mobile subscribers in Italy and another 24 mn in Brazil. As of September 2006, it posted sales of €23 bn and its EBITDA was €9.8 bn. As Telecom Italia’s market cap is about $77 bn, Pirelli’s 18% stake will be valued at around $12-13 bn.

Telecom Italia is owned 18% by a company called Olimpia, which, in turn, is controlled by Pirelli, the Italian tyre and real estate group. Sometime ago, Pirelli increased its Olimpia holding to 80% by buying stakes owned by two banks. This transaction raised the possibility of Pirelli consolidating Olimpia’s accounts with itself. Such a move would badly dent Pirelli’s credit rating as its net debt would jump 31 times. The debt of both Olimpia and Telecom Italia is at around $57.12 bn. To avoid this, Pirelli is believed to be scouting around for buyers for the telecom company.

The Hinduja Group is also in the race for India’s fourth largest telecom company, Hutchison Essar, in which British telecom major Vodafone, Reliance Communications and Essar are bidding. On Friday, the group announced that it would begin due diligence of Hutchison Essar on January 24 and that a final bid will be submitted after that.

Blackstone, the private equity group, had said in November 2006 that it might be interested in taking a stake in Telecom Italia.

Read more in The Economic Times and Business Standard.

New Enterprise Associates to buy 50% stake in HFCL Infotel

New Enterprise Associates (NEA), a US-based private equity firm, may buy up to 50% of HFCL Infotel, a listed cellular service provider arm of HFCL. The stake is estimated to be valued at Rs. 350 crores. The company may reportedly go for a preferential allotment to allow NEA to pick up to 50% stake in the company.

HFCL Infotel offers CDMA-based services in Punjab, including fixed-line, fixed wireless terminal, and digital mobile services. As of November-end, HFCL Infotel had about 327,000 subscribers. The company also provides leased line services and PCO services. The company is estimated to have an enterprise value of $230-250 mn (including a debt of about $80 mn). As per the current shareholding, the promoters hold 62% in HFCL Infotel, private corporate bodies hold just over 30% and 2.51% is held by the public.

NEA has been scouting for buys in India. The company plans to invest $125-175 mn from its recently-closed $2.5 bn fund. Recently, it also created an Indian arm, NEA IndoUS, which is raising a $150 mn fund ($30 mn provided by NEA) to primarily put into start-ups here.

Read more in The Economic Times article.

VSNL may bid $90 mn for US-based Data Return

The Tata Group is making news all around. This time, another group company VSNL, an international long distance telecom major, is reportedly planning a bid for US-based Data Return, which is into managed hosting services and IT operations. The deal size is estimated to be around $90-100 mn. Data Return is a privately-held entity, of which 80% is owned by an investment firm Saratoga Partners and the rest being held by the management. It primarily caters to the North American market and has a headcount of around 250.

Data Return registered revenues of $51.1 mn for the 2005 fiscal and had a net loss of $8.5 mn, with valuation of the company pegged at $85-95 mn. The auction process for the proposed sale has evinced interest from two other bidders.

Lehman Brothers to invests in Delhi-based VAS provider Cellebrum

Delhi-based value-added services (VAS) solutions provider Cellebrum is getting funding from Lehman Brothers, reportedly to the tune of $15 mn. Cellebrum is the VAS arm of Delhi-based MCorp Group. The amount raised will be invested in the technological development of the company and for other R&D-related purposes. The firm is also panning to start an incubation fund wherein the money from the fund will be mainly used to takeover smaller players in the VAS segment or get into strategic tie ups to launch more services in the telecom sector.

More on The Economic Times.

Vodafone also in the race for Hutch

After Reliance, Maxis, Bharti and Essar itself, the Hutch-Essar JV seems to have found a new suitor. It seems that Vodafone, the British telecom giant, is reported to bid for Hutch-Essar. UBS, which is Vodafone’s house banker, is said to be advising the company on financing and acquisition strategies.

Both Vodafone and UBS have refused to comment on the development.

Vodafone is selling its stake in its holdings across market as it faces severe investor backlash. It sold its 25% stake in Swisscom for about $3.5 billion and a similar stake in a Belgian wireless operator to Belgacom; before that it had exited companies in both Sweden and Japan. The Japanese transaction was valued at about $16 billion.

In India, Vodafone has invested in a 10% stake in Bharti Airtel, the value of which now is estimated to be around Rs. 16, 000 crores. Vodafone might consider selling its stake in Bharti for financing the acquisition.

Read the article from The Economic Times.

Ambani goes for the kill, to buy out Ruia’s stake as well

Finally, Anil Ambani has made his intentions absolutely clear. Reliance Communications will buy out Hutch-Essar in its entirety. Nimesh Kampani, representing the Ruias is believed to have held meetings with Anil Ambani. Various parties as interested in buying out Hutchison’s stake in Hutch-Essar are doing the rounds of investment circles. These include Ruias themselves raising debt from banks and buying Hutch’s stake in the JV. Bharti’s Mittals are also heard to be interested in buying out the company. Even the name of the Tatas has been mentioned. Maxis, the Malaysian telecom company, is also set to bid for Hutch-Essar. The Ruias stand to gain around $4-5 bn if they sell their stake to Reliance Communications. Ruias are being advised by Morgan Stanley and Goldman Sachs. UBS is advising Ambani on the deal. Buyout funds like Blackstone, Texas Pacific, Carlyle and Kohlberg Kravis Roberts, among others, are supporting Reliance to structure the financing. With about $10 billion through cash to buy equity and around $2-4 billion as debt from major foreign banks, Reliance seems to be the frontrunner in getting the Hutch-Essar telecom business.

Read the article from Business Standard.

Reliance Comm dials banks for Hutch deal

Anil Ambani is leaving no stone unturned to acquire the prized 67% stake of Hutchinson Whampoa in Hutch-Essar. As of latest reports, Reliance Communications has tied exclusivity agreements with a number of foreign banks, presumably, Citibank, HSBC, ABN-AMRO and UBS. This means that not only will these banks provide the necessary debt for the transaction, but the agreements will also prevent them from working with any other prospective or existing bidder. This agreement with the said four banks is crucial, as all have expertise in multi-billion dollar cross-border acquisition financing and their experience would have been of enormous use to rivals. RCL is already in talks with private equity funds such as Kohlberg Kravis Roberts & Co (KKR), Blackstone and Texas Pacific Group for equity financing.

For more, read the following articles The Economic Times, The Financial Express and Business Standard.

The Hutch stake: Game on

Hutchison’s 52% stake in Hutchison Essar Ltd. seems to be gathering a high level of interest amongst the telecom players and equally with PE funds. The Ruias are believed to be looking at buying their partners stake, for which they plan to approach a few banks, as reported by Business Standard.

The race is already on with a number of players lining up for the stake including Reliance Communications in tie up with a few PE funds, Egyptian telecom giant Orascom and Malaysia’s Maxis

The Anil Ambani groups Reliance Commnications has reportedly tied up with four American private equity funds — Blackstone, Texas Pacific Group, KKR and Carlyle, who collectively have equity investments of $100 billion. Reliance Communications would endeavor to be the majority domestic partner if the bid comes through reported the Economic Times.

Orascom, which has over 19 per cent stake in Hong Kong-based HTIL is understood to have appointed Deutsche Bank as their adviser while Standard Chartered is supposedly advising Malaysia’s Maxis.

Goldman Sachs is the advisor to Hutchison and will evaluate all the bids

Go to article from The Economic Times

Go to article from Business Standard