Telecom Italia buys 49% in Unitech Wireless

Telecom Italia has piped Norway’s Telenor to acquire 49% stake in Unitech’s telecom arm. A top Unitech executive confirmed that the two firms are close to reaching an agreement whereby Unitech’s telecom business will be transferred to a new company in which Telecom Italia will invest $2 billion for 49% stake. The majority 51% in the joint venture company will be held by Unitech.The real estate company’s equity contribution will be in the form of its pan-India licences to operate in all 22 telecom circles and the initial groundwork. Unitech won’t go for any stake sale and the joint venture company will issue fresh shares to Telecom Italia.The Italian company’s funds will be used for laying down the network, rolling out operations as well as bidding for 3G spectrum.Telecom Italia, which had fallen behind in the race to acquire stake in Unitech’s telecom arm earlier, was able to clinch the deal because it agreed to settle for a minority stake.Sources said Unitech was not inclined to give away controlling stake, which Telenor and the Middle East telco Zain were demanding. The real estate company was also not convinced about Zain’s ability to create great value for its telecom business.Telecom Italia team has been camping in Delhi and has accompanied Unitech executives to meetings with equipment vendors. The executives of the two companies met Nokia officials on Wednesday and are expected to meet HP officials on Thursday.Unitech has already hired 250 people for its telecom venture and plans to roll out services by April next year. The company has received spectrum for six circles. The company expects to invest Rs 20,000 crore in its telecom business over the next three years. It recently raised Rs 1,200 crore for its telecom venture from a syndicate of public sector banks led by Punjab National Bank and Canara Bank.Unitech, which negotiated with several foreign telecom players including AT&T, Etisalat and Altimo, took over six months to finalise an equity partner. Now that a partner is most probably in place, Unitech can speed up its roll out plan. Telecom Italia, which reported a revenue of 14.8 billion euros in the first half of 2008, had been looking for a foothold in an emerging market like India, which can give its business a big boost.