Sivasankaran entering S Tel

[karthik]

C Sivasankaran may be about to re-enter India’s booming mobile telephony market with a stake in S Tel, a Chennai-basedcompany that has licences to operate in several northern and eastern states.Mr Sivasankaran, a serial entrepreneur who sold his cellular services firm Aircel for $1.08 billion to Maxis Telecom at the end of 2005, was barred from buying more than 10% stake in any Indian telecom company as part of a non-compete agreement he had signed with the Malaysian company.That agreement ended at the end of March this year, enabling him to re-enter the sector. Mr Sivasankaran, more known by his sobriquet Siva, has built his reputation around buying, running and turning around unprofitable businesses and later flipping them for a profit. His activities have spanned sectors ranging from telecom to banking to coffee chains to food.His latest foray into the Indian mobile sector is likely to involve the buyout of one of two private equity firms that together own 51% in S Tel, a person close to Mr Sivasankaran told ET.“Siva now aims to re-enter the Indian telecom space through S Tel, as he sees growth in this sector,” said the person, who was part of the team that helped Mr Sivasankaran flip Aircel a year after he bought it from the RPG Group. “One of the promoters of S Tel has expressed a desire to exit. The deal could likely be completed by the first quarter of 2009,” the person added.An S Tel official confirmed that talks were on with Mr Sivasankaran, and said the firm will make an announcement soon. However, he declined to give details, saying he was not authorised to speak to the media.Neither Mr Sivasankaran nor S Tel replied to e-mails sent by ET. MV Srinivasan, group CEO of Siva Ventures, an investment firm owned by Mr Sivasankaran, couldn’t be reached despite several attempts.The lure of India’s telecom market is hard to resist. Easily one of the fastest-growing markets in the world, it added a record 15.6 million users last month as low call charges amid fierce competition drives rapid take up in rural areas. The telecom sector had 429 million users at the end of March, the vast majority of them mobile users.S Tel is 49% owned by Batelco Millennium India, a consortium formed by Bahrain Telecommunications and Dubai-based Millennium Private Equity, which in January this year announced plans to buy a 49% stake in S Tel for about $225 million, valuing the company at around $450 million.Private equity firms Skycity Foundations and Telecom Investments (Mauritius) own the remaining 51% stake.Mr Sivasankaran is planning to buy the stake of one of these two, said the person familiar with the matter, without identifying which private equity firm he was talking to.Although not much is known about these two PE firms, S Tel’s website identifies them as “co-promoters”. It has also been widely speculated that Mr Sivasankaran has “links” to S Tel, which has never been confirmed.S Tel has Unified Access Services Licences — government parlance for telecom licences that allow wireline as well as wireless services in a service area — and start-up spectrum in Bihar, Orissa, Jammu & Kashmir, Himachal Pradesh, the North East and Assam.It also holds a Category A ISP licence that allows it to provide broadband services across the country.Last year, S-Tel attracted attention when it offered to pay Rs 13,752 crore to the government for a pan-India spectrum. Earlier in 2008, it was reported to have doubled the offer of revenue to the government for licences in all 22 circles for which it had applied for.Mr Sivasankaran already has an 8.6% stake in Tata Teleservices, for which he paid Rs 1,200 crore in 2006. He is also rumoured to have invested Rs 350-400 crore in the telecom arm of Unitech, which has been denied by Unitech officials.