CHICAGO (MarketWatch) – Cablevision Systems Corp. said Monday that it has signed a deal to acquire Bresnan, the No. 13 U.S. cable company, for about $1.4 billion, and that it will implement its first-ever stock buyback program.

Analysts were cautious about the transaction, expressing concerns about the purchase price and the strategic value of cable systems far away from the company’s core New York City market.

Bethpage, N.Y.-based Cablevision (CVC 24.00, +0.60, +2.56%) , the nation’s fifth-largest cable operator, is set to acquire Bresnan through a newly-formed subsidiary that will pay about $1 billion in debt. Cablevision will make an equity investment of less than $400 million.

Bresnan owns systems in Colorado, Montana, Wyoming and Utah that serve more than 300,000 basic cable subscribers. The company’s services are available in more than 630,000 households.

Separately, Cablevision said its board of directors has authorized the repurchase of up to $500 million of its Class A common stock.

Cablevision shares were up 2.4% at $23.97 Monday morning.

Craig Moffett, cable analyst at Sanford C. Bernstein & Co., said the Bresnan deal “is not what investors had in mind,” and that many will be “frustrated” that the company didn’t use its financial resources to acquire more shares of Cablevision itself, for far less money.

In a note to clients Monday morning, Moffett asserted that Cablevision seems to be concerned that it will be at a disadvantage in a marketplace in which Comcast (CMCSA 18.40, +0.21, +1.15%) , the largest U.S. cable operator, is aggressively buying more programming assets. Cablevision is trying to get bigger, in the analyst’s view, to avoid “a catastrophic increase in programming costs” as a standalone entity. Most notably, Comcast is currently trying to acquire a controlling stake in NBC Universal from General Electric (GE 15.71, +0.15, +0.96%) .

However, Moffett explained, “Bresnan is not big enough to materially change Cablevision’s own leverage with programmers.”

Another potential problem for Cablevision shares, Moffett noted, is that many investors have seen Cablevision as a takeover candidate, adding a premium to the stock. Now, many people will assume that the founding Dolan family never intends to sell, and some of those investors may dump Cablevision stock, the analyst said.

For Marci Ryvicker of Wells Fargo Securities, the transaction is strategically suspect. “[W]e don’t understand CVC’s strategy in going outside its current footprint,” she said in a research note. Cablevision owns highly valuable cable systems in New York City.

Ryvicker is at least more sanguine about the buyback announcement. “We think a share buyback of size puts a more positive light on this deal, despite the apparent lack of synergies.” She also said the move seems to show that Cablevision is listening to investors, though she would have preferred to see a repurchase program of $700 million or higher, given the company’s $7 billion market cap.

David B. Wilkerson is a reporter for MarketWatch in Chicago.

(Reuters) – Abu Dhabi’s Etisalat (ETEL.AD) is looking at a deal with Reliance Communications (RLCM.BO) as it mulls its options in India, while AT&T Inc (T.N) denied media reports it was in talks with India’s No. 2 mobile player.

A frenzy of deal-making speculation has surrounded the Indian company, the only major local cellular carrier without a foreign strategic investor in the world’s fastest-growing mobile market.

Valued at about $7.7 billion, Reliance Communications said on Sunday it was open to selling a stake of up to 26 percent to strategic or private equity investors.

Talk about a stake sale started soon after controlling shareholder Anil Ambani and his long-estranged brother Mukesh ended an agreement that forbade them from competing on each other’s turf, freeing Anil to bring new investors into his debt-laden company.

Reliance Comm’s board has approved selling up to 26 percent at a premium, and at current market prices, the stake is worth about $2 billion.

The Indian mobile carrier did not give a time frame or any details about a possible deal, but media reports and a person familiar with the matter had previously cited Abu Dhabi’s Etisalat and South Africa’s MTN (MTNJ.J) as potential partners.

“We did not make any offers to Reliance. We’re studying several opportunities in India, among them is Reliance,” Etisalat Chairman Mohammad Omran told Reuters in Amman on Monday.

“India is a large market and we are closest to India. But we’re studying several acquisitions,” he said, citing new licenses that will become available in Syria and Iraq.

“We don’t have a liquidity problem,” he said.

Etisalat, which already has a start-up joint venture in India, said last week it was looking to buy a stake in an Indian operator and was in talks with several firms.

AT&T, which has previously shown interest in India, denied reports in the Wall Street Journal and the New York Times that the companies are talking about a transaction.

“In response to news reports, AT&T today said it is not in discussions with Indian wireless company Reliance Communications,” AT&T said in a statement.

One person familiar with the matter had previously told Reuters that contact between AT&T and Reliance was “very early feelers” as opposed to formal discussions.

Finding a buyer willing to pay a high premium for a minority stake in Reliance Comm may be a challenge given the ongoing price war in India’s 15-player cellphone market and the heavy capital expense needed to build out third-generation mobile networks.

Reliance Comm shares rose 14 percent last week on talk of a deal but still ended Friday 80 percent below their early 2008 peak.

BRUISING MARKET

In a sign of just how bruising India is, UK giant Vodafone (VOD.L) said last month it would take a charge of 2.3 billion pounds ($3.3 billion) on its India business and is also fighting a $2.56 billion tax bill in the country.

Market leader Bharti Airtel (BRTI.BO), searching for more attractive opportunities elsewhere, is paying $9.7 billion to buy Zain (ZAIN.KW) of Kuwait’s Africa operations. Bharti is about one-third owned by Singapore Telecommunications (STEL.SI).

“The event would indeed be positive for RCOM, if it happens, however, we would view it as negative for the sector,” Kotak Securities analysts wrote in a note on Monday.

“This event would mean a further infusion of risk capital in the industry, without leading to any consolidation,” the analysts said.

Reliance Comm had net debt of 199 billion rupees ($4.2 billion) at the end of March and last month paid 85.85 billion rupees for a 3G licenses in an auction that was far more costly than had been forecast. A stake sale would help it cut debt.

A Reliance Comm official could not immediately be reached for comment on Monday. But the company has said its board has approved pursuing other “appropriate strategic consolidation opportunities.”

Reliance Comm shares rose as much as 6.5 percent on Monday before closing 4.6 percent higher, outperforming a broader market .BSESN that lost nearly 2 percent. More than 11 million shares traded, nearly six times its 30-day average of 1.97 million.

The Times of India newspaper last week said Etisalat, the Gulf region’s biggest provider of telecoms services, was in advanced talks to buy a quarter of Reliance Comm for 180 billion rupees ($3.8 billion), a healthy premium.

Separately, India’s Economic Times newspaper had reported that Reliance Comm was considering a merger with MTN, with which the Indian firm had held tie-up talks in 2008.

(US$= 0.6930 pounds = 47.215 rupees)

($1=47.4 rupees)

(Additional reporting by Sinead Carew in New York, writing by

Tony Munroe; Editing by Valerie Lee, Anshuman Daga and Tim Dobbyn)

By Chris Foresman | As AT&T Wireless CEO Ralph de la Vega has hinted at for months, AT&T announced this morning a major overhaul to its smartphone data plans. AT&T will now offer two-tiered data plan pricing, with a top cap set at 2GB. Though most users should save money, according to AT&T’s research, users that relied on unlimited data will be paying more.

The company has also announced that a long-awaited tethering plan will for the first time be available to iPhone users, about a year after tethering functionality was enabled in last year’s iPhone OS 3.0 upgrade. iPhone tethering will become a reality “this summer” with the iPhone OS 4.0 upgrade; curiously, the new pricing plans go into effect the exact same day that Steve Jobs is expected to announce the next revision of the iPhone at WWDC. Along with the new smartphone plans, AT&T is also capping iPad 3G users at 2GB per month, effectively wiping out the “amazing” pricing that Steve Jobs announced back in January after only one month of iPad 3G availability.

“To give more people the opportunity to experience the benefits [of mobile broadband], we’re breaking free from the traditional ‘one-size-fits-all’ pricing model and making the mobile Internet more affordable to a greater number of people,” said de la Vega in a statement. De la Vega and other mobile CEOs have been suggesting for a while now that “unlimited” plans aren’t tenable with the growing tide of smartphones and other data devices. The good news is that these changes should offer some savings for a lot of users; the bad news is that some of the changes make AT&T’s data far more expensive compared to plans from other carriers.

Tiered pricing

AT&T will now offer a lower-end data plan, called DataPlus, for $15 per month. Users on this plan get 200MB to use for one month, and those that go over will be given an additional 200MB for another $15. According to AT&T’s analysis, 65 percent of its smartphone customers use less than 200MB on average. Checking around the Orbiting HQ, all but one of us with an iPhone on AT&T fall into this category.

The new high-end plan, called DataPro, gets you 2GB of data use for $25 per month. If you go over 2GB, you’ll pay $10 for each 1GB increment. For example, if you use 3.5GB, you’ll pay $25 + $10 + $10, or $45 for the month. AT&T is not offering an unlimited data tier at any price. The company says that 98 percent of its customers use less than 2GB of data, so among these two plans, all but the heaviest data users should theoretically save on their monthly bill…

…unless you are interested in the new smartphone tethering plan. AT&T will charge you an additional $20 to use your smartphone for wireless data use with a laptop or other device. However, tethering can only be combined with the 2GB DataPro plan, and the $20 per month charge doesn’t include any extra data allowance. There are no pay-as-you-go options for tethering; It’s $45 per month for 2GB total usage (with $10 per GB overage) or no tethering at all.

These pricing plans go into effect on June 7 for all new AT&T customers signing up for new contracts, and current users can switch to the new plans without a contract extension. Those that are currently on a two-year contract for a $30 per month unlimited data plan can continue to use it, and can even renew their contract and keep the same data plan as long as they continue to use the same device.

At first glance, it appears that heavy users could just stay with their old plan and keep on using up to 40 percent of the data traffic on AT&T’s network. If you want tethering on your iPhone or other smartphone, however, you’ll have to switch to a new plan. And once you switch, you can’t go back.

To help mitigate the sting somewhat, AT&T is offering free access for all smartphone users to its network of over 20,000 branded WiFi hotspots around the country. AT&T has offered this to iPhone users for some time, so this is nothing new for them.

iPad downside

iPad WiFi + 3G users, who were sold the promise of unlimited data for $30, might be in for the biggest shock by these pricing changes. Just a month after the iPad WiFi + 3G went on sale, AT&T is pulling the $29.99 unlimited data plan and replacing it with a $25, 2GB per month plan.

Those that are currently signed up for a $29.99 unlimited plan will continue to be renewed at that rate. However, if you cancel that plan for any reason, you will not be able to sign up for it again—2GB for $25 will be your only option.

“For $25, we’re providing customers with a large amount of data,” AT&T spokesperson Seth Bloom told Ars. “We believe that 2GB of data on the 3G network will be plenty for most customers, especially since based on the trends we’ve seen thus far, iPad customers tend to use WiFi a lot.”

Inexplicably, the company is keeping the $14.99, 250MB per month plan for the iPad. “We have a unique pricing model for iPad, as we do for other emerging devices that don’t require a contract term or commitment,” explained Bloom. However, it makes the low 200MB cap on the DataPlus smartphone plan seem questionable.

To be fair, prepaid data pricing from the likes of Verizon or Virgin Mobile is quite a bit more expensive (Verizon charges $30 for one week of 3G data access with a 300MB cap), so AT&T’s pricing with respect to the iPad isn’t that bad in comparison. However, there are no monthly contract options, nor are there options to share that data allowance with an existing data plan. And the one-month pricing switcharoo is, we expect, going to leave a very bad taste in a lot of users’ mouths.

Anti-consumer?

So far, it seems that most users could end up paying less. But not everyone thinks AT&T’s new plans are a good deal for consumers.

“While AT&T asserts that its high-end 2GB cap will only impact the heaviest users, the fact is that today’s heavy user is tomorrow’s average user,” Free Press policy counsel M. Chris Riley said in a statement. “Internet overcharging schemes like the one AT&T proposes will discourage innovative new uses and stifle healthy growth in the mobile broadband economy. It is price gouging for AT&T to charge the low-end users $15 per 200MB, and to charge $20 for tethering capability even if no additional capacity is used. This pricing system is clearly divorced from the actual underlying cost of service.”

Let’s consider the data plans further. The 200MB cap on the low-end DataPlus tier effectively makes the price per gigabyte $76.80. But users on that plan can only get an additional 200MB allotment for another $15; they can’t opt for an additional 1GB for $10 like users of the DataPro plan.

The Data Pro plan is effectively $12.50 per gigabyte, with $10 per gigabyte for each additional gigabyte. That’s far more reasonable than what AT&T is charging for the DataPlus plan, and accomplishes AT&T’s goal of curbing the abnormally high use of a small percentage of users. For comparison, however, smartphone data plans from Verizon are $29.99 with a 5GB cap, making the effective price per gigabyte just $6. So while AT&T may charge you less, you’re also getting far less than what the competition offers.

And comparing total monthly plan costs, Sprint offers a great deal as well. While AT&T smartphone users can have a bill as low as $54.99 with the new data options combined with the cheapest calling plan, Sprint customers can get unlimited calling, unlimited SMS and MMS, and unlimited data for $69.99. “With the latest phones delivering capabilities never before offered on a wireless device, customers are using more data, not less,” Sprint spokesperson Emmy Anderson told Ars. “With Sprint Everything Data plans, there’s no need to get out a calculator to tally up prices for each feature or guess how much data you’ll use in a month.”

The tethering pricing is also a raw deal for consumers. US iPhone users that have been waiting for a year may gladly pay the extra $20 per month fee, even as users in other countries have been tethering for a while without issue—some for no additional charge. But that doesn’t make it a good deal, even though other carriers, like Verizon, also charge an additional fee for tethering. While Verizon charges an additional $25 per month, it also includes a 5GB monthly allowance. And while AT&T effectively charges 10¢ for each extra MB over the 2GB cap, Verizon only charges 5¢ per MB—and you don’t have to buy extra data in 1GB chunks.

The tethering pricing seems even worse compared to Android phones, which can convert to a mini-WiFi hotspot for free using an application. All smartphone users are effectively paying for a monthly allotment of data—why should it matter if those bits go directly to a smartphone app or to your laptop? If you ask us, it shouldn’t.

Wireless broadband capacity may arguably be a somewhat scarce commodity—the FCC and wireless carriers have been arguing that more spectrum is needed to serve the needs of an increasingly wireless population in the US. AT&T’s new pricing plans will definitely save money for a variety of users in the long run, and may help limit the network use of heavy users. But some users—those who need only occasional tethering, for instance—are definitely going to be paying more, and getting a lot less in return.

OVERLAND PARK, Kan. (TheStreet) — In an effort to boost its low-cost cellphone service offerings, Sprint(S) has unveiled plans to launch its fourth prepaid cellphone brand later this month as well as revamp its Virgin Mobile, rolling out a slew of new prepaid products and services.

The telecom giant unveiled four new prepaid handsets within the Virgin Mobile portfolio on Thursday — Research In Motion’s(RIMM) Blackberry Curve, LG’s Rumor Touch and Rumor 2, and Kyocera’s Loft.

Sprint also announced that Virgin Mobile will launch three new ‘Beyond Talk’ plans on May 12. The plans, which include unlimited messaging, email, data and Web services, start at $25 a month, going up to $60 a month for high-end smartphone users. A Blackberry data service can be added to the plans for an additional $10, according to Sprint.

The cheapest version of ‘Beyond Talk’, however, limits users to 300 minutes of voice calls per month, although the $60 offering provides unlimited voice.

With prepaid mobile plans growing in popularity, this could be a shrewd move by Sprint. The telecom giant, which is ramping up its 4G efforts, added 348,000 new prepaid customers during its recent first-quarter results. This is particularly crucial for Sprint, which has seen its postpaid business come under severe pressure from rivals Verizon(VZ) and AT&T (T).

The Midwestern-based telecom giant lost 75,000 net wireless subscribers during the first quarter, but said that it is stemming its post-paid losses. Sprint suffered a net loss of $865 million during the quarter, although there has been talk that the company is finally rebounding.

Investors responded positively to Sprint’s revamp of Virgin Mobile, and the company’s stock rose 13 cents, or 3.11%, to $4.31 on Thursday. Shares of AT&T and Verizon, in contrast, dipped 1.16% and 0.19%, respectively.

– Reported by James Rogers in New York

FOXBusiness – Verizon said Tuesday it is open to the idea of Apple’s (AAPL: 238.15, -0.34, -0.14%) blockbuster iPhone device coming to Verizon Wireless, the largest U.S. mobile carrier.

“We’re open to getting the device,” Verizon CEO Ivan Seidenberg said at a conference hosted by the Council on Foreign Relations, Dow Jones Newswires reported. “Our network is capable of handling it,” he added, in a possible jab at AT&T (T: 26.26, -0.08, -0.3%), the exclusive carrier of the iPhone in the U.S. that has been hurt by network problems.

Seidenberg also said it’s Apple’s call on bringing the iPhone to Verizon Wireless, which it co-owns with Vodafone (VOD: 22.84, -0.64, -2.73%).

The comments from Seidenberg come after The Wall Street Journal reported last week that Apple is developing a new iPhone that would be capable of running on Verizon Wireless and Sprint Nextel (S: 3.88, -0.02, -0.51%), the No. 3 U.S. wireless carrier.

Seidenberg also addressed the health-care overhaul, which was signed into law last month and will cause Verizon to take a $970 million write-down. Seidenberg said he believes the attempt to broaden health-care access is a positive, Dow Jones reported. However, he pointed out that while new fees kick in right away, the cost-cutting part of the overhaul doesn’t start for several years.

There’s still a lot of uncertainty in the market and traders are still dealing with swings in volatility and unreliable returns.

But there are plenty of stocks delivering solid returns despite the craziness of the market. Taking a look at some of them can offer clues as to which companies might be poised to make runs over the next few weeks.

By the way, did you know you could have made 191% on AAPL even though the stock only rose 28%? Learn how with this special report: 5 Profitable Options Trades for 2010

Telecom Argentina S A (TEO) is one of the top performing stocks in the market in terms of price gain over the last 30 days. The stock has posted a sizable 13.97% gain in price in the last month and closed last session at $18.84. Over the same time the S&P 500 index has returned around 3.51%.

Often, price gains are driven by gapping in the stock’s price due to an announcement or corporate event. Other times, the stock has seen sustained upward price growth over the period. So be sure to always do some basic technical analysis to determine what’s really causing the price action to make a determination whether you expect it to continue or not.

And always compare to other stocks in the industry. TEO competes for investor dollars in the Diversified Communication Services industry. While TEO has been a top performer, industry peer Level 3 Communications Inc. (LVLT) has seen a 1.25% gain in stock price over the same time, while another peer, Brasil Telecom S.A. (BTM) saw a -6.46% gain (loss)

The Diversified Communication Services industry as a whole saw a 0.22% gain. So TEO has outperformed its industry as a whole 6250% during its big run up.

NEW YORK (AP) — AT&T Inc. will take a $1 billion non-cash accounting charge in the first quarter because of the health care overhaul and may cut benefits it offers to current and retired workers.

The charge is the largest disclosed so far. Earlier this week, AK Steel Corp., Caterpillar Inc., Deere & Co. and Valero Energy announced similar accounting charges, saying the health care law that President Barack Obama signed Tuesday will raise their expenses.

All four are smaller than AT&T, and their combined charges are less than a quarter of the $1 billion that AT&T is planning. The $1 billion is a third of AT&T’s most recent quarterly profit. In the fourth quarter of 2009, the company earned $3 billion on revenue of $30.9 billion.

AT&T said Friday that the charge reflects changes to how Medicare subsidies are taxed. Companies say the health care overhaul will require them to start paying taxes next year on a subsidy they receive for retiree drug coverage.

White House spokesman Robert Gibbs said Thursday that the tax law closed a loophole.

Under the 2003 Medicare prescription drug program, companies that provide prescription drug benefits for retirees have been able to receive subsidies covering 28 percent of eligible costs. But they could deduct the entire amount they spent on these drug benefits — including the subsidies — from their taxable income.

The new law allows companies to only deduct the 72 percent they spent.

AT&T also said Friday that it is looking into changing the health care benefits it offers because of the new law. Analysts say retirees could lose the prescription drug coverage provided by their former employers as a result of the overhaul.

Changes to benefits are unlikely to take effect immediately. Rather, the issue would most likely come up as part of contract negotiations between the company and unions representing its employees and retirees. AT&T is the largest private employer of union workers in the U.S.

Candice Johnson, spokeswoman for the Communications Workers of America, which represents more than 160,000 AT&T workers, said these employees have contracts in place until 2012. An agreement covering retirees also runs through 2012.

AT&T rival Verizon Communications Inc. was among 10 companies that sent a letter to congressional leaders in December warning that their costs would increase with the health care changes. Verizon did not immediately return a phone call seeking comment.

Shares in AT&T, which is based in Dallas, climbed 9 cents to close Friday at $26.24.

By ROGER CHENG
Qwest Communications International Inc. reported a 39% slide in fourth-quarter earnings as a result of severance costs and the continued deterioration of demand in its traditional phone services.

The Denver telecommunications company faces further decline in its so-called legacy business as more consumers drop their landline in favor of a wireless connection, or get their phone services from the cable companies.

Unlike its larger telecom-carrier peers, Qwest doesn’t own its own wireless business to offset the losses. Instead, it looks to its burgeoning business services division, as well as its limited fiber-optic network upgrade project, for growth.

Qwest reported a profit of $108 million, or six cents a share, down from $177 million, or 10 cents, a year earlier. Results included severance costs of two cents. Revenue dropped 9.7% to $2.99 billion.

In laying out its plans for the year, Qwest executives focused on pushing investment in several projects, including a more aggressive roll-out of a faster network. It is a change in tone for a company that has largely relied on slashing expenses to improve its bottom line.

“For the past few years, [Qwest] has been a cost-cutting story, and they continue to do better at bringing costs down than we expected,” said Todd Rosenbluth, an equity analyst at Standard & Poor’s.

The consumer phone business saw revenue decline 13% from a year ago on further line losses. The company has been able to offset that in part with growth in the small areas where it has upgraded its network to offer a faster Internet connection. While the company plans to spend more on the project, it remains slow relative to its larger peers.

The wholesale business, in which it carries phone traffic for the other carriers, also declined 14% as the company sheds business it deems less profitable. The company actively stopped carrying long-distance traffic in the quarter.

To better compete against the cable companies, Qwest partners with Verizon Wireless for wireless services, and DirecTV Group Inc. for television.

Qwest added 64,000 wireless subscribers in the period, bringing its base to 850,000. It added 23,000 satellite TV customers, bringing its base to 880,000.

Qwest is a relatively small player in the business services market, and as a result, has been able to grow its share and limit its revenue decline. Revenue for advanced Internet-based services, however, rose 24%.

Executives said business spending remained stable, offering a relatively more optimistic view on the segment than its peers. “When the big guys are ready to spill some money, we’re there to catch it,” said Chief Executive Ed Mueller.

The company ended the quarter with 10.3 million total access lines, down 11% from a year earlier. Broadband subscribers increased 4.5%. Average revenue per user, a key metric for the industry, rose 5.4%.

Looking ahead, Qwest expects “improving revenue comparisons” over the course of the year with the year-over-year decline improving to a low-to-mid single-digit rate by the fourth quarter. The company sees 2010 adjusted earnings before interest, taxes, depreciation and amortization of $4.3 billlion to $4.4 billion.

Write to Roger Cheng at roger.cheng@dowjones.com

NEW DELHI/LONDON (Reuters) – Bharti Airtel (BRTI.BO) is in exclusive talks to buy most of Kuwaiti telecom group Zain’s (ZAIN.KW) African business, the Indian firm’s third attempt at gaining a foothold in a continent that offers a last opportunity for major subscriber growth.

DEALS

Under the exclusivity period the companies have until March 25 to seal the $10.7 billion deal — the second largest in the industry this year after Mexican tycoon Carlos Slim’s move to consolidate his telecoms empire.

Bharti, controlled by billionaire Chairman Sunil Mittal and Zain said the deal was still subject to due diligence and regulatory approvals.

But Mohamed Al Kharafi, chairman of Kuwait’s Kharafi group, which owns 11.47 percent of Zain through one of its units, told Indian television he was confident a deal would go through and that an all-cash transaction was planned.

The move by Bharti, which is 30 percent-owned by Singapore Telecommunications Ltd (STEL.SI), follows two failed attempts to buy South Africa’s MTN Group MTN.J in a $24 billion deal.

Analysts expect Bharti to raise debt to finance the Zain acquisition having last year scrapped a planned $3 billion to $4 billion loan linked to its planned tie-up with MTN.

ANZ, Barclays Capital, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Citigroup, DBS Bank, State Bank of India and Standard Chartered Bank were among the lenders shortlisted for that deal, according to Thomson Reuters LPC.

Bharti has been hunting for emerging market assets as its home turf becomes fiercely competitive. New entrants into the world’s fastest-growing mobile market have triggered a vicious price war which has seen some call charges slashed to a fraction of a U.S. cent. Bharti posted its slowest profit growth in more than three years for the December quarter.

“The competitive pressure in the Indian telecoms sector is so high that players such as Bharti will have to redefine themselves and look for overseas expansion,” said Rishi Sahai, director at M&A advisory firm Cogence Advisors.

“Chances of a deal happening this time are very high unless some regulatory issues come up.”

However, Bharti’s share price slumped more than 9 percent at the close of the Mumbai market, wiping around $2.4 billion off the firm’s market value and marking their biggest daily fall since October 6, amid fears that the Zain deal may prove expensive.

“Bharti is offering a high price. Zain’s board should bite their hand off,” said a London-based telecoms banker, who is not involved in the deal.

“They are probably thinking they need to get a deal in Africa before anyone else that has ambitions there.”

Kharafi said if the deal goes ahead Bharti aims to pay $10 billion in April for the African assets of Zain, which have $2 billion of debt on its books, and the remaining $700 million by the end of the year.

Africa represents about 62 percent of Zain’s 64.7 million customers, but only 15 percent of its group net profit.

Zain’s board has approved the sale to Bharti, a person familiar with the issue said on Sunday.

Standard Chartered (STAN.L) and Barclays are advisers to Bharti, while UBS (UBSN.VX) is advising Zain, sources said.

EMERGING POWERHOUSE

Zain, with its African and Middle East businesses, had been considered a natural target for Bharti, which has thrived in an Indian market with low incomes and tariffs and a heavily rural population — characteristics shared by African nations.

Mobile phone penetration in half of Africa’s countries was below 40 percent as of August and a dozen countries had penetration below 30 percent, according to a research report.

Last month Bharti agreed to buy 70 percent of Bangladesh’s Warid Telecom from Abu Dhabi Group for an initial investment of $300 million.

Offloading the operations, excluding those in Morocco and Sudan, would mark a strategic reversal for Zain, which has spent more than $12 billion expanding in Africa since 2005.

“It’s a good deal with a win-win situation for both parties,” said Naser al-Nafisi, general manager of Al Joman Center for Economic Consultancy in Kuwait.

“For the Kuwaiti side it’s a company that is reducing its debt and will focus more on the Middle East. Zain is balancing between the interests of their lenders and shareholders.”

Zain will use the proceeds to pay back debt and distribute cash dividends to shareholders, Group Chairman Asaad al-Banwan told Kuwaiti daily al-Seyassah on Monday.

Zain pulled back from an expansion spree last year, rejecting an offer from France’s Vivendi (VIV.PA) for its African assets.

Indian brokerage Batlivala & Karani Securities said Bharti’s move was “directionally positive” due to challenging conditions at home, but the deal’s valuation looked expensive.

It said Bharti was valuing the Zain assets at an enterprise value of nine times EBITDA earnings and 13,000 rupees ($280) per subscriber.

With 119 million mobile users in India at end-2009, Bharti accounted for 23 percent of the market, but it faces increasing competition from newcomers such as Norway’s Telenor (TEL.OL) and Tata Teleservices, part owned by Japan’s NTT DoCoMo (9437.T).

(Additional reporting by C.J. Kuncheria in New Delhi, Ami Shah and Pratish Narayanan in Mumbai, Sumeet Chatterjee in Bangalore, Ema Goman in Kuwait and John Irish in Dubai; Editing by Ian Geoghegan, Greg Mahlich)

By Roger Cheng
NEW YORK (Dow Jones) – Motorola Inc.’s (MOT) decision to bundle together its mobile devices and home products divisions in a pending spin-off indicates the company plans to use video to set itself apart in the ultra-competitive smartphone market.

The Schaumburg, Ill., company on Thursday laid out a new plan to evenly split the company instead of separating just the handset unit. By keeping cellphones and cable set-top boxes together under one company, Motorola is better able to integrate video service found in the home with burgeoning consumer interest in mobile content.

“This structure places us uniquely to take advantage of the trends,” co-Chief Executive Sanjay Jha told Dow Jones Newswires.

Motorola boasts the world’s largest television set-top box business, giving the company a rare line into the home. The company also has made strides in turning around its struggling handset business, jumping from nothing to No. 3 in North American smartphone sales during the fourth quarter.

The company envisions combining the capabilities of both divisions, enabling consumers to take videos stored on their cable boxes, and seamlessly moving them onto their phones.

“Strategically, it makes perfect sense. There’s no question that success in one area can be leveraged in the other,” said Avi Greengart, who runs consumer device research for Current Analysis.

It remains unclear, however, how hard consumers and video providers are clamoring for such services, and how quickly these integrated services will appear. The company has long talked about creating an environment for video to hit multiple platforms, but it has little to show for its aspirations.

“This seamless mobility strategy is a reincarnation of sorts of a prior strategy that never came to realization,” said Maynard Um, an analyst at UBS.

The intensifying competition in the smartphone market may spark a renewed effort. While Motorola’s smartphone push has seen initial success, the company has yet to truly distinguish itself.

The Droid enjoyed its moment as the phone with the latest version of Google Inc.’s (GOOG) Android mobile software for a few weeks before attention shifted to Google’s own Nexus One device. Motorola points to Motoblur, a social networking-centric user interface that runs on top of Android, as its main differentiator.

Still, it remains a challenge to stand out among a wave of Android phone, as well as the Apple Inc. (AAPL) iPhone and Research in Motion Ltd.’s (RIMM) Blackberry line. The company could make its mark by throwing Motoblur into its set-top boxes.

Motorola isn’t the only one with these aspirations. Apple has tried to link its iPhone and Mac line of computers to the television, but hasn’t seen much success with its Apple TV product. Many expect Microsoft Corp. (MSFT) to tout a deeper link between its Windows PC operating system, its Xbox 360 video game system, the Zune media player and Windows Mobile software for smartphones during next week’s Mobile World Congress.

Video providers are also embracing the trend. AT&T Inc. (T) often refers to it as its “three-screen” strategy. Cable companies such as Comcast Corp. (CMCSK, CMCSA) have been tinkering with bundling wireless with its core services, while privately held Cox Communications Inc. plans to start its own cellphone offering. Dish Networks Corp. (DISH) purchased wireless spectrum in the last government auction for a possible mobile TV service.

Jha declined to tip his hand on potential products, but he noted that the divisions were already looking at various projects linking the capabilities of both units.

“We are already working on products that are relevant to consumers,” Jha said.

As part of the split, Motorola’s debt gets shifted away from mobile devices business, giving Jha a fresh start. The addition of the set-top box business means a source of steady cash and financial flexibility as the mobile devices continues with its turnaround. While Jha expects the unit to return to profitability in the fourth quarter, more volatility is expected in the following quarters.

The home business isn’t without its challenges. The set-top box isn’t purchased by the consumer. Instead, the cable, telco and satellite providers provide the box for a small monthly fee. As a result, upgrades take longer since the decision is made by a large company, rather than the individual.

In addition, the wireless carriers have a lot of say in what goes into their cellphones. Some carriers may not want to push those video capabilities, because moving the content around could potentially overload their networks.

“The opportunity is there, but whether Motorola can capitalize it is another question,” Greengart said.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com