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By Ruma Paul and Pratish Narayanan
DHAKA/MUMBAI (Reuters) - Leading Indian telecom Bharti Airtel plans to buy Bangladesh's Warid Telecom for a reported $900 million from Abu Dhabi Group, indicating a shift in focus to smaller targets after its planned $24 billion merger with South Africa's MTN failed.
Bharti will buy a 70 percent stake in Warid, Bangladesh's fourth-biggest telecom company, while Abu Dhabi Group will retain the rest, an official with the selling firm said.
"We expect to seal the deal by mid January 2010," Abu Dhabi Group Chief Commercial Officer Ali Tahir told Reuters. He declined to give the sale price.
UAE-based Abu Dhabi Group, a consortium of investors that includes members of the royal family of Abu Dhabi, sought approval from Bangladesh's telecoms regulator for the sale on Sunday, according to the regulator's chairman, Zia Ahmed.
The deal is set against a backdrop of this week's announcement that oil-rich Abu Dhabi will provide $10 billion to Dubai in order to help its neighbour meet its debt obligations.
Bharti's expansion would give the Indian phone leader access to Bangladesh's rapidly growing mobile sector at a time when it is locked in an intense price war in India with rivals Reliance Communications and Vodafone Essar.
For the Abu Dhabi Group, the deal will enable it to focus on other telecoms markets where it can have a bigger market share, Tahir said.
Bharti said on Wednesday it was evaluating international opportunities, but declined to comment on plans to buy Warid.
Bharti initially plans an investment of $300 million, Bangladesh's Ahmed said. He said a written proposal by Abu Dhabi Group did not pin a full value on the deal.
Bangladesh's Daily Star newspaper had reported the final deal could be worth $900 million, citing Warid officials.
Shares in Bharti closed up 2.8 percent in a Mumbai market that was up only 0.2 percent.
"The dynamics of the Bangladesh market are similar to those in India, where Bharti has proven itself," said Phani Sekhar, fund manager at Angel Broking, which holds Bharti shares.
SMALLER STRATEGY
Bharti, which has more than 100 million subscribers in India, is looking to replicate its staggering growth at home in other emerging markets, where scale is vital, many customers are poor and rural, and penetration rates are low but rising fast.
Indian mobile operators are locked in an intense tariff war that has raised concerns about profitability. The price war is aimed at grabbing new users as new firms enter the market.
Bangladesh's mobile sector has grown rapidly, with subscriber numbers reaching more than 51 million at the end of October from 200,000 in 2001, helped by low penetration levels, competitive tariffs and steady economic growth.
Analysts predict the number of subscribers could top 70 million by 2011, nearly half the country's population of 150 million.
The news comes two-and-a-half months after talks between Bharti and MTN Group to create the world's third-largest mobile operator collapsed for the second time in just over a year on South Africa's reluctance to allow a flagship corporate to lose its national character.
"You cannot wait for two years, three years for a big deal to get completed while opportunities for smaller deals go by," Sekhar said.
Warid Telecom also operates in Pakistan, Uganda and the Congo. Singapore Telecommunications bought a 30 percent stake in Warid's Pakistan business for $758 million in 2007 from the Abu Dhabi Group. Warid's operations in Pakistan, India's neighbour and political rival, are not part of the Bharti deal.
"Warid needs investment for expansion in order to survive in this highly competitive market," said Fazlul Haque, a former member of the governing body of state-owned Bangladesh Telecommunications Co Ltd.
At the end of October, Warid had 2.79 million subscribers -- far fewer than Grameenphone, majority owned by Norway's Telenor. Egyptian Orascom Telecom's Banglalink and Telekom Malaysia's Aktel also operate in the country. Warid Bangladesh began operations in 2007.
Abu Dhabi Group's Tahir said his firm was focused on markets where it can be a leader. "In this (Bangladesh) and emerging markets, you will see lots of consolidation as price competition is heating up," he said.
"We want to be a big player, number one rather than number two in the markets we operate," he said, adding that the group is selectively looking at markets in the former Soviet Union.
(Additional reporting by Stanley Carvalho in Abu Dhabi, C.J. Kuncheria in New Delhi; Editing by Ranjit Gangadharan, Lincoln Feast and Eric Auchard)
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