Sistema to buy Aircel for dollar 3 billion

Malaysian billionaire of Indian origin T Ananda Krishnan has held direct talks with Russian telecom giant Sistemato sell 74% stake in his mobile telephony company Aircel, said sources aware of the development. Sources said Ananda Krishnan, or TAN as he is called, and his local partner, the Reddys of the Apollo Hospital Group, want to quit India's telecom sector which is mired in controversies. 

TAN's Maxis Communications, which owns majority shares of Aircel, is discussing a Sistema proposal which values the Indian mobile operator at about $6 billion, said a source mentioned above. The valuation number could not be confirmed independently. Russian conglomerate Sistema operates the MTS brand in India through a joint venture with Shyam Telelink. 
The development could mark the biggest shake-out in India's scam-hit telecom industry, which has seen business valuations collapse after a controversy erupted on 2G spectrum allocations two years ago. Sources said there was no certainty that ongoing talks would lead to a deal. 

UAE-based telco Etisalat and Bahrain Telecommunications exited their smaller Indian joint ventures in the past 12 months after the Supreme Court cancelled 122 mobile permits in a landmark judgment in the 2G scam in February this year. 

Sistema Shyam Teleservices, the JV in which the Russian conglomerate holds 74%, said: "The talk of engaging with other telecom service providers for a possible acquisition deal is motivated. From the perspective of Sistema Shyam TeleServices, the immediate priority is to seek clarity on spectrum-related regulations from the government and also look at the outcome of the company's curative petition filed in the Supreme Court." 

An Aircel spokesperson said that she did not know of any such development and that the telecom operator will inform the media if any such deal goes through. 

Industry sources said a prominent Indian industrialist was mediating to facilitate a deal between Sistema and Maxis. Incidentally, Maxis has been open to M&A options even before its investments were impacted by the controversies. The Malaysian major has invested about Rs 45,000 crore and carries a debt of about Rs 20,000 crore on its Indian unit. 

Sources said the Reddy family, which is a 26% shareholder, will also exit Aircel after their passive investment in the telco dragged the family into CBI investigations. This follows allegations from serial entrepreneur C Sivasankaran that former telecom minister Dayanidhi Maran coerced him to sell Aircel to Maxis in 2006. CBI is likely to summon TAN in connection with the controversial Aircel-Maxis deal. The agency has registered a case against the Maran brothers, Ananda Krishnan, Ralph Marshall and three companies - Astro All Asia Networks, Sun Direct TV and Maxis Communications - under relevant sections of criminal conspiracy and Prevention of Corruption Act.