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Abu Dhabi's Etisalat has confirmed it is looking to buy a stake in an Indian mobile operator following reports that it is in talks with India's second-biggest mobile operator, Reliance Communications, over a US$3.8 billion deal. The stake would give Etisalat a vital presence in the world's fastest-growing mobile market, where it currently owns a stake in a start-up telecoms firm.

Reliance is controlled by billionaire Anil Ambani. The company is currently involved in a price war and is also spending billions of dollars on next-generation licenses meaning that any deal would bring in much-needed funds.

"Not only Reliance Communications but some other players will also be looking at selling some stake to raise funds to cut debt," K.K. Mital, head of portfolio management services at Globe Capital in New Delhi told Reuters. "Players like Etisalat are looking at long-term opportunities of the Indian telecoms market despite the short-term pain due to competitive pressure.?

India has more than 600mn subscribers and nine of its fifteen operators already have foreign partners. Reliance is the largest telecom firm not to have a direct foreign stake.

Etisalat's chairman, Mohammad Hassan Omran, told Reuters his firm could decide within weeks about a deal in India while Reliance said it has received proposals from time-to-time from international telecom companies expressing interest in acquiring a strategic equity stake in it. The Times of India newspaper reported that Etisalat was in advanced talks to buy a quarter of Reliance for US$3.8 billion with the market currently valuing the Indian company at about US$7 billion.

A person close to Reliance, who declined to be identified, said the report was speculative. However, Omran said: "We are talking to several Indian operators and are evaluating several Indian operators but have not reached a final decision. It may take a few weeks or it may take a few months. We think the Indian market is ready for consolidation.?

Indian rules prohibit a company from holding a more than 10 per cent stake in two operators competing in the same telecom zone, which might force Etisalat either to sell its holding in the startup Etisalat DB, or merge it with Reliance. India's top mobile operator, Bharti Airtel, has already sealed a US$9 billion deal for the African assets of Kuwait's Zain.