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Turkcell in talks to buy 51% stake in Datacom

Turkcell, a leading Turkish telecom company and Europe’s third-largest operator by subscribers, is in talks to buy 51% stake in Datacom Solutions. The deal is expected to put the enterprise value of the company at nearly $2.2 billion.

Sources said the Turkish company wants the Indian promoters—Dhoots of Videocon and Mahendra Nahata, chairman of Himachal Futuristic Communications (HFCL) group—to resolve their differences before signing the deal. “Turkcell will buy into Datacom only after the promoters resolve their differences.

Dhoots will have to buy out Mr Nahata, and Turkcell will then enter the company,” the sources said. If the proposed structure goes through, Dhoots will continue to hold 49% stake in the company while the foreign telco will have 51%.

Under the arrangement between the promoters of Datacom, the Dhoots have the right of first refusal in case Mr Nahata decides to sell his 36% stake in the company. The two sides have differences over management of the company, which received pan-India telecom licence last year. Datacom has spectrum in 13 out of the 22 circles of India.

When contacted, a Datacom official denied that the company was in discussions with Turkcell. An e-mail sent to Turkcell last week did not elicit response.

Sources said the NYSE-listed Turkcell has been talking to Datacom since August this year. The foreign company has held another round of meeting this month, they added. Sources in the investment banking circles said Datacom was seeking an enterprise value of around $2.6 billion. Istanbul-based Turkcell had 48.5 million subscribers as on June 30, 08. Besides Turkey, it is also present in Azerbaijan, Kazakhstan, Georgia, Moldova and Ukraine.

Indian telecom growth story seems to have remained unaffected by the global liquidity crisis, with unabated interest in the sector from global operators.

Recently, two new telecom licensees— Swan Telecom and Unitech Wireless— have attracted foreign buyers. While UAE’s Etisalat has acquired a 45% stake in Swan for $900 million, Norwegian giant Telenor bought 60% in Unitech Wireless, putting the company’s valuation at nearly $2.3 billion.

While these entities paid Rs 1,650 crore (around $400 million) for getting licenses, promoters are selling equity in the company at much larger valuations. “There is no metrics for valuing these new operators, which have no perations but only spectrum in some circles. It will take at least three to five years for them to become profitable. The biggest attraction with international telcos facing saturation in most other geographies is the low tele-density in India,” a Mumbai-based analyst said.

While Datacom’s targeted December 15 date for network rollout has been delayed pending resolution of differences between the promoters, the company is looking at starting work from April next year. “Datacom has received bids for equipment and is expected to award the contract next month,” said industry sources.

Source: Economic Times

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