Etisalat's Indian Hurdles

4:30 PM -- Etisalat is close to acquiring a 26 percent stake in Reliance Communications Ltd. for more than 150 billion Indian rupees (US$3.2 billion), according to The Economic Times.

But the United Arab Emirates carrier has plenty of hurdles to leap before it can buy a stake in India's second largest mobile operator. (See India's Mobile Market Hits 617M and Reliance Lines Up Stake Sale.)

That's because Etisalat already holds a 44.73 percent stake in startup GSM operator Etisalat DB Telecom India Pvt. (formerly Swan Telecom), its joint venture with India's Dynamix Balwas Group that recently launched its services in multiple circles. (See Swan Telecom Renamed.)

And according to Indian law, companies cannot hold stakes of more than 10 percent in rival telecom operators. That means Etisalat would need to cut its stake in its startup to be able to invest in Reliance Communications.

A further complication is that Etisalat also holds a stake in Pakistan Telecommunication Co. Ltd. , a politically delicate situation that will make it harder for the carrier to get clearance for any investment in Reliance. It already tried to increase its stake in Etisalat DB to take majority control (foreign firms are allowed to hold up to 74 percent of an Indian company), but the move failed to get clearance from the Indian government. (See Etisalat Seeks Control of Indian Ops.)

— Gagandeep Kaur, India Editor, Light Reading

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