Growing India/Pakistan tensions may impact telcos

It has been suggested that rising political tensions between India and Pakistan over the Mumbai attacks at the end of November may spill over into the economic arena, and that companies such as Telenor and Etisalat that have investments in both countries may be barred from operating in both markets.

In 2006 Etisalat concluded the acquisition of a 26 per cent stake in Pakistan Telecommunication Company Limited (PTCL). The UAE operator also has a management agreement in place in Pakistan and at one point was even rumoured to be looking to double its equity stake in the Pakistan operator.

In September last year, the UAE operator went on to gain access to the Indian telecoms market, having agreed to acquire a 45 per cent stake in Indian GSM licensee Swan Telecom, at a cost of US$900 million.

Etisalat had spoken of its determined interest in entering the burgeoning mobile market in India for over two years, and the licensing of six new GSM operators in India in early 2008 proved the opportunity to facilitate the actioning of this long-held ambition.

Swan Telecom is owned by the DB Group, and the Etisalat acquisition highlighted the premiums willing to be paid by the UAE operator in order to enter markets it believes to be of strategic significance. Pan-Indian licences were offered at a cost of approximately US$400 million each, and Swan Telecom was not even one of the bidders to acquire such a licence, paying a lesser amount for a concession that extended to 13 of India’s 22 telecoms districts.

Swan Telecom, which is likely to go to market under the Etisalat brand name, had been set to launch commercial services early in 2009.

Norway’s Telenor acquired its position in India in October 2008, paying US$1.07 billion for a 60 per cent stake in Unitech Wireless, an Indian GSM licensee with concessions to roll out its network to all 22 telecommunications circles in India. Telenor also runs a successful mobile operation in Pakistan, which launched in spring of 2005.