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The prospect of 3G and broadband wireless spectrum in India did not produce the wave of foreign investment and M&A that many expected before the auctions. But, as predicted by players like Vodafone, the acquisitions are set to start in the immediate aftermath of the license awards, and second placed cellco Reliance Communications is first in the firing line.

AT&T, South Africa's MTN and the UAE's Etisalat are all said to be in a race to acquire a "significant minority stake", up to 26%, in RCom, the only major Indian cellco with no foreign ownership. AT&T was linked with Indian ventures before, in the run-up to the 3G auctions, but The Wall Street Journal believes its talks, though early stage, are serious this time. Last fall, the US carrier was rumored to be in talks to acquire a 25% stake in state-owned telco BSNL, though a privately run operator would give it greater freedom of action within India. It previously exited the Indian mobile business in 2005 when it sold its 33% stake in Idea Cellular, following its merger with Cingular Wireless. This may now look like a huge error, given that AT&T got about $250m for a stake that would now be worth around $3.5bn, and Idea remains a major cellco. In 2008, AT&T was in talks about re-acquiring a share in Idea, as well as being linked to Reliance and Aircel, though the only transaction it has recently made in India has been to exit its stake in IT services firm Tech Mahindra.

AT&T could face a battle for the RCom stake though, up against two expansionist Middle East/Africa players, keen to push into the highest growth Asian mobile markets. MTN lost out on a merger plan with India's largest cellco, Bharti Airtel, after several failed rounds of talks (Bharti then purchased Zain's African assets instead). It also proposed an equity swap deal with RCom in 2008, but this was blocked by former sister company, Reliance Industries, which is controlled by Mukesh Ambani, the estranged brother of RCom chief Anil Ambani. However, the first refusal rights invoked by Mukesh then, under a non-compete deal between the brothers, no longer apply.

MTN has been casting around for consolation prizes, which could also include Orascom's African operations. Meanwhile, Etisalat already has a 2G joint venture in the subcontinent, Etisalat DB, and is looking for acquisitions in many areas. It missed out on Zain Africa but could look at Vodafone Egypt and Libya's third license, among other options. Etisalat chairman Mohammad Omran told the Reuters news agency that his firm is "talking to several Indian operators and evaluating several Indian operators but have not reached a final decision". If the operator is successful, it may have to divest DB, or merge it with RCom, as India bars a foreign player from holding more than 10% in more than one telco.

Last weekend, RCom said its board had approved the sale of up to a 26% stake in the firm to help reduce its $6.2bn debt and fund its 3G roll-out. The board said it would sell the shares at an "appropriate premium to the prevailing market price". This could still make it an attractive purchase, as its shares have fallen in value by 50% over the past year. Etisalat is rumored to have offered about $3.9bn, which if true could start the bidding, though MTN is being more cautious, denying reports in India's Economic Times that it was already in merger talks with RCom.

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