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AT&T Sells Full 7% Stake In Tech Mahindra For About INR6.55 Bln

AT&T Inc. (T) Wednesday sold its entire 7% stake in Tech Mahindra Ltd. (532775.BY) through two block deals for about INR6.55 billion ($147 million), leaving analysts worried that this could hurt outsourcing business from the U.S. telecommunications major to the Indian software services provider.

The stake sale comes just a month after AT&T International Inc., a unit of AT&T, bought an 8.07% stake, or about 9.9 million shares, in Tech Mahindra from Mahindra-BT Investment Co. (Mauritius) Ltd. for $34.6 million as part of a 2005 agreement with the Indian company.

AT&T sold just over 1% stake earlier this month and the balance 8.6 million shares Wednesday at about INR762 apiece, two people familiar with the matter told Dow Jones Newswires.

“The buyers were more than one, but LIC (Life Insurance Corp.) bought 88% of the stake sold,” one of the persons said, but didn't name the other buyers.

According to data on the Bombay Stock Exchange Web site, AT&T International sold 4.3 million shares and state-run LIC bought 3.76 million shares. The BSE data didn't give details of other buyers.

An equal number of shares were sold on the National Stock Exchange, according to FactSet data.

LIC officials didn't respond to queries from Dow Jones Newswires.

AT&T declined to comment on the stake sale but said that its relationship with Tech Mahindra gives it strategic advantages and it intends to continue to work with the company to meet its information technology requirements.

Tech Mahindra Managing Director Vineet Nayyar told Dow Jones Newswires that AT&T hasn't informed the Indian company of any stake sale.

“The share of business from AT&T has continuously risen in the last couple of years, and will continue to do so,” Nayyar added.

Despite the assertions, Tech Mahindra shares slumped to end 4.3% down at INR770.05 on the BSE, where the benchmark Sensex closed 1.8% lower.

AT&T is Tech Mahindra's second-largest client after BT Group PLC, contributing 18% to 20% of total revenue. BT Group owns 30.83% of the Indian company.

“Our understanding is that AT&T was giving business to the company (Tech Mahindra) because of the stake. Now, Tech Mahindra's ability to win new business from AT&T in the future in a competitive market will be a concern,” a Mumbai-based analyst, who didn't wish to be named, said.

Tech Mahindra competes with larger peers such as Infosys Technologies Ltd., Wipro Ltd. and Tata Consultancy Services Ltd. for contracts from AT&T and other global companies.

Tech Mahindra and AT&T declined to comment on the analyst's views.

Citigroup was the sole arranger for AT&T's stake sale in Tech Mahindra.

Source: WSJ

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