Batelco to Acquire 49% of India's S Tel

Batelco said yesterday it would buy 49% of Indian mobile operator S Tel Ltd for US$225 million, Reuters reports. Batelco said it was partnering with Millennium Private Equity to acquire the stake in S Tel as it makes its first foray outside of the Middle East. The former telecoms monopoly in Bahrain said it expected to complete its acquisition of S Tel during the first quarter. "Our priority now is to assist S Tel to rapidly roll out network infrastructure and offer mobile services to customers," Batelco chief executive Peter Kaliaropoulos said the statement. S Tel was one of the nine companies which were granted unified access services (UAS) licences in India last year. The start-up will operate in Northern India, where it has licences to offer mobile and fixed-line services in six telecoms circles.

Outlook and Implications

• Expansion Beyond Home Region: In its domestic market, Batelco offers fixed-line, mobile and has recently launched a next-generation network (NGN) which enables every resident in Bahrain to receive triple-play services (see Bahrain: 23 December 2008: Batelco to Launches NGN Services in Bahrain). Although the majority of Batelco's revenues come from mobile services, growth from this sector has already started to show signs of a slow down. This is primarily due to its very high penetration levels of 148% at the end of 2007 and competition from the region's largest mobile operator, Zain. Batelco only marginally leads the mobile market share with 56%; this relatively equal market share has been attributed to Zain offering like for like mobile services since its launch at the end of 2003. Although Bahrain has the highest mobile penetration in the MENA region, the very small domestic population of just over one million will make for tougher market conditions. This, combined with the regulator finalising the process of introducing a third mobile operator, has forced Batelco to spend its cash reserves in emerging markets (see Bahrain: 29 October 2008: Batelco Plans Ready to Entry India and Africa with US$2-bil. Investment).
• One More Deal in India: Although the deal will give Batelco the opportunity to enter India's fast-growing mobile market, S Tel, with licences to operate in only six out of India's 22 telecoms circles, will have a limited presence compared to other operators in the country. With 12 operators already offering mobile services in India, competition in the country's mobile market will further intensify with a handful of new licensees due to launch services this year. Despite the global financial and economic downturn, India's telecoms sector continues to see active acquisition activities fuelled by foreign investment. Having seen a string of acquisitions by foreign telcos in 2008, more deals should be reached this year, with Videocon-owned Datacom, Loop Telecom, and Reliance Communications being the most obvious targets (see India: 13 November 2008: NTT DoCoMo to Acquire 26% Stake in Tata Teleservices for US$2.7 bil. and India: 29 October 2008: Telenor to Acquire 60% of Indian Start-Up Unitech Wireless and India: 24 September 2008: Etisalat Acquires 45% Stake in Swan Telecom for US$900 mil.). The upcoming auction of 3G and WiMAX will also provide some opportunities for foreign telcos to enter the market (see India: 13 January 2009: India to Revise 3G Auction Schedule).