Telekom Malaysia might partner with strategic investors to increase their combined stake in Spice Communications to 74 per cent.
The Malaysian giant has 39.20 per cent equity in the telecom company and foreign institutional investors hold 9.59 per cent, taking the total foreign holding to 48.79 per cent.
The potential partners include United Arab Emirates's largest telecom company, Emirates Telecommunications Corp (also known as Etisalat).
Spice, the regional wireless service provider, operates in the Punjab and Karnataka telecom circles and has a 2.2 per cent market share in the country's total GSM space.
Recently, it received licences to operate in four more circles -- Andhra Pradesh, Delhi, Haryana and Maharashtra -- but is awaiting additional spectrum.
The UAE company is looking for a share of the fast growing Indian mobile service market. A Bloomberg report quoted Mohammad Hassan Omran, chairman of the Abu Dhabi-based company, as saying that the company has "entered into direct meetings with various entities, amongst them Spice Communications," although nothing has been completed from these meetings or studies at this stage.
Telekom Malaysia was not available for comment.
However, top sources close to the B K Modi family, which holds a 40.8 per cent stake in the company through Modi Wellvest, made it clear that they were not willing to sell their stake to anyone.
B K Modi, chairman of the group, declined to comment on the issue.
In that case, the foreign telecom companies will not be able to increase their stake to 74 per cent as the floating stock available is only 20 per cent. Sources also said that Telekom Malaysia would have to make an open offer if it wanted to directly increase its stake in the company.
However, Etisalat can buy up to 15 per cent from the open market without having to make an open offer according to SEBI guidelines.
Sources close to the Modis point out that they would also oppose an open offer at a price below Rs 46, which shareholders paid at the time of the Spice PO.
"Etisalat has partnered with Telekom Malaysia in Indonesia and is looking at a similar strategy in India," said a source close to the company who did not wish to be named.
This year Etisalat bought 16 per cent of PT Excelcomindo Pratama for $438 million to enter Indonesia, the world's fourth most populous country.
Telekom Malaysia owns 67 per cent stake stake in Excelcomindo.