Etisalat has gained access to more than 900 million potential new customers, acquiring a 45 per cent stake in the start-up Indian mobile operator Swan Telecom. The company has been on a long-running foreign expansion spree, focusing much of its recent attention on India, where a number of new national mobile operators were licensed earlier in the year. The deal "marks an acceleration of our expansion strategy and brings to us an opportunity which matches the scale of our ambitions", said Mohamed Omran, the chairman of Etisalat. The company is now present in five of the 10 fastest-growing mobile markets in the world, with India second only to China in the number of new mobile subscribers joining each month. In the first six months of this year, more than 50 million new customers joined India's 12 mobile networks - just short of Etisalat's entire customer base at the end of last year. Etisalat will pay US$900 million (Dh3.3 billion) for the stake, implying an overall valuation of $2bn for Swan. The figure is on the low end of the expectations of onlookers leading up to the deal, who had predicted valuations of up to $3bn. The price paid by Etisalat will likely provide a guideline for the ongoing sale of a handful of other Indian mobile operators currently seeking foreign suitors. Billions of dollars of new investment will be required for Swan to roll out a national mobile network and the supporting operational and marketing efforts. The current national market leaders, Reliance Communications and Bharti Airtel, had been investing upwards of $2bn per year for the last three to four years, said Sheriar Irani, a telecommunications analyst at JM Financial, an investment bank based in Mumbai. "The competition is going to be very difficult," he said. "The existing operators that already have the networks and the economies of scale to compete nationally are going to be tough to overcome." In entering other new markets like Saudi Arabia, Egypt and Nigeria, Etisalat has emphasised a varying combination of affordability, customer-focused innovations and advanced, high-technology network infrastructure. A frequent tactic has been a number-booking campaign, letting potential customers reserve their preferred number online in the months before a launch. Like those of Egypt and Nigeria, India's market remains under-penetrated, with almost three quarters of the population yet to own a mobile. But these potential customers make up the vast low-income base of India's economic pyramid, and are unlikely to spend more than a few dollars each month on a mobile phone, analysts say. Competing on price may be possible for a company like Etisalat, which has its deep pockets filled by a highly profitable home market. But Mr Irani said there was little room remaining for discounts in a market with some of the cheapest calling rates in the world. "Prices have fallen sharply with competition in recent years, and I'm not sure if it would make sense for a new entrant to drop them any further," he said. "It will take more than five years to break even as it is." Swan, owned by an Indian business group with a background in real estate, has been looking for a foreign strategic partner since acquiring licences that allow it to operate in 13 of the country's 22 telecommunications regions. It is in the process of purchasing licences for two more regions, Etisalat said. Last year, the UK-based Vodafone Group, the world's second-largest mobile operator by market value, spent $11.1bn to acquire Essar, the number-three player in the Indian market. firstname.lastname@example.org
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