UAE’s Etisalat said on Wednesday that it was looking to buy a stake in

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an Indian mobile operator. The task for the Abu Dhabi-based company is, however, cut out, as it has to reconcile its presence in the Indian telecom space through an on-going joint venture with its latest interest to buy into another Indian mobile operator.

Etisalat’s chairman told Reuters his firm could decide within weeks about a deal in India. Mohammad Omran told the news agency: “We are talking to several Indian operators and are evaluating several Indian operators but have not reached a final decision.”

Omran declined to comment specifically about reports that it was talking to Reliance Communications for a $3.8 billion equity buy-out and said Etisalat had not taken any final decision. “It may take a few weeks or it may take a few months,” he said, adding, “We think the Indian market is ready for consolidation.”

Etisalat has a start-up joint venture with DB Realty in India that has an all-India licence to provide telecom services obtained in 2008 by paying the 2G licence fee of Rs 1,651 crore. The licence was originally granted in the name of Swan Telecom. The joint venture, now called Etisalat DB Telecom India, launched operations in March.

No company is allowed to run two telecom operations in India and Etisalat, if successful in realising its interest in buying into a second telecom operator in the country, has to either quit its existing venture with DB Realty or seek a merger of the two operations. Both tasks face regulatory hurdles. The rules say no entity can have more than 10 per cent stake in two telecom companies.

Under the current merger and acquisition guidelines of the Telecom Regulatory Authority of India (Trai), there is a lock-in period of three years applicable to the sale of stake by promoters in a telecom venture. Although Trai has recently mooted the idea of relaxing the M&A norms so as to enable consolidation in the telecom industry, the fresh recommendations are yet to be enforced.

The vice-chairman of DB Realty, Shahid Balwa, on Wednesday told CNBC-TV18 that the report published in newspapers was inaccurate and cannot be relied upon. He said Etisalat had established a company in India in which it owned 45 per cent and in which DB Infra (independently held by the DB Realty promoters) held another 45 per cent. The operations of Etisalat are all routed through Etisalat DB Telecom India.

The Reuters report also quoted Reliance Communications as saying it had been receiving proposals from time to time from international telecom companies expressing interest in acquiring a strategic equity stake in it.

For Reliance Communications, controlled by Anil Ambani, this would bring in much-needed funds, especially as the company is caught in a margin-destroying price war and is paying billions of dollars for next-generation licences.

Reliance Communications, one of the worst performing shares in BSE’s 30-share index so far this year, closed 11 per cent higher on Wednesday, while the Etisalat stock was down 0.5 per cent. The market is currently valuing the Indian company at about $7 billion.

K K Mital, head of portfolio management services at Globe Capital in New Delhi told Reuters: “Not only Reliance Communications but some other players will also be looking at selling some stake to raise funds to cut debt.”

“Players like Etisalat are looking at long-term opportunities of the Indian telecom market despite the short-term pain from competitive pressures,” he said.

India has more than 600 million subscribers and nine of the 15 operators already have foreign partners. Reliance Communications is the only big telecom firm not to have a direct foreign stake in it.

A stake sale could mean a change in strategy for the ambitious Ambani, who made several smaller acquisitions to expand his firm overseas, and in 2008 set his sights on a tie-up with South Africa’s MTN in an ultimately thwarted deal.

Last month, Ambani ended an agreement not to compete in businesses with his long-estranged brother Mukesh, which also frees him to bring outside investors into his firm.

Reliance Communications’ bid for a tie-up deal with MTN was thwarted two years ago after Mukesh asserted a right of first refusal on the Indian carrier’s shares.

In a frenzied industry auction for 3G mobile licences Reliance Communications forked out about $1.8 billion in May for its licences, while Etisalat did not win any licence.