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Maxis Snaps Up Aircel

Malaysia's Maxis Communications Bhd. has stepped into the flourishing Indian mobile market with the acquisition of GSM operator Aircel Ltd. for $1.08 billion. (See Maxis Acquires Aircel.)

The deal includes a cash injection of $280 million, valuing Aircel at $800 million.

Maxis will take a 65 percent direct stake in the operator and has formed a joint venture company with a partner in India that will own the other 35 percent, giving Maxis an overall holding of 74 percent. That's the maximum allowed by the Indian government, which recently liberalized foreign ownership rules for the telecom sector to encourage investment. The previous limit was 49 percent.

The liberalization appears to be working -- the Maxis deal follows U.K.-based Vodafone Group plc (NYSE: VOD) acquiring a 10 percent stake in Bharti Tele-Ventures Ltd. for $1.48 billion, and Egyptian operator Orascom Telecom taking a 19.3 percent interest in Hutchison Telecommunications International Ltd. (NYSE: HTX) for $1.3 billion. (See Vodafone Buys Bharti Stake and Orascom Buys Hutch Stake.)

It's also a sign of Maxis expanding internationally in the face of rising competition at home -- it acquired its first overseas company last January when it paid $100 million for a 51 percent stake in Indonesia's PT Natrindo Telepon Seluler.

Maxis says the purchase reflects the huge growth potential of the Indian mobile market, which analysts predict will hit 300 million subscribers by 2009. As of November 2005, India had 67 million mobile subscribers, up 3.51 million from the previous month, and 6.2 percent cell phone penetration, according to the Telecom Regulatory Authority of India (TRAI) . (See India's Telecom Market Accelerates.) Estimates peg growth at around 4 million new subscribers for December.

One of India's smaller carriers, Aircel's GSM network covers 6 percent of the population, with a 4 percent share of the market. It has 2.23 million subscribers in the Tamil Nadu region in the south, and has ambitious expansion plans in North and East India.

Demand for telecom services is growing so fast in India that there are waiting lists for phone lines, and Aircel aims to tap into that with plans to operate in 12 of India's 23 telecom regions by the end of the year, encompassing 58 percent of the population. It has rolled out networks in five new regions so far, adding 60,000 subscribers since September.

This is the third time Aircel's parent company, the Sterling Infotech Group, has attempted to sell off the operator. Hutchison Essar had to abandon a deal signed in 2004 after it failed to win regulatory approval, and a deal with Russia's Sistema JSFC (London: SSA) stalled over financing problems. (See Hutch Acquires Aircel.)

— Nicole Willing, Reporter, Light Reading

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