Rumor Mill: AT&T angling for a stake in India's Reliance

AT&T (NYSE:T) is holding preliminary talks with India's Reliance, the country's second-largest wireless carrier, about buying a minority stake in the company, according to multiple reports.

Reliance, which has 106 million mobile subscribers, is planning to sell up to a 26 percent equity stake to raise cash for its debt and network upgrades. According to reports in the Wall Street Journal and the New York Times, which cited anonymous sources, AT&T is holding preliminary discussions about acquiring the stake. However, in a statement, AT&T denied that it is in discussions with Reliance.

According to the Journal, advisers to both companies have been in touch during the past few weeks regarding a deal. The stake is worth around $2 billion at current market prices. Abu Dhabi-based Etisalat Emirates Telecommunications also has been mentioned as a potential suitor.

Like Reliance, AT&T is the second-largest carrier in its market--AT&T Mobility has 87 million subscribers in the United States, second only to Verizon Wireless (NYSE:VZ). The thinking is that AT&T, facing a saturated market in the U.S., is looking for a growth opportunity abroad. Indeed, India, with a population of more than 1 billion, already has 600 million wireless subscribers--and more than 17 million new subscribers sign up per month. However, AT&T could face significant challenges, including complex tax and merger rules. Additionally, there is intense competition in India, where six players each have more than 10 percent market share.

"AT&T has been dealt an unsatisfying set of cards. Its wired business is in unrelenting decline, and there's not much growth left to be had in U.S. wireless anymore," Sanford C. Bernstein analyst Craig Moffett told the New York Times. "Emerging markets offer the tantalizing prospect of growth. Unfortunately, India is a hyper-competitive market where profits have been exceedingly hard to come by."

For more:
- see this AT&T release
- see this WSJ article (sub. req.)
- see this AT&T release
- see this Bloomberg article
- see this Reuters article
- see this NYT article

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