February 12, 2007

Vodafone bags Hutch for $ 19 billion



UK Telecom giant Vodafone Sunday appeared all set to acquire India's fourth largest mobile venture Hutch-Essar for an estimated enterprise value of $19 billion.

The telecom giant emerged top bidder for Hutchison Telecom's majority stake in the venture.

Vodafone, headed by India-born Arun Sarin, is understood to have pipped Anil Ambani Group company Reliance Communication, a consortium led by NRI group Hindujas and Indian conglomerate Essar, which has 33 per cent stake in the venture.

The winner emerged at the Hutchison Telecom Ltd's board meeting at Hong Kong convened for considering the four bids for its 67 per cent stake put on the block late in 2006.
Telecom penetration(%)
Singapore97
Korea82
Malaysia74
Thailand50
China34
India12


While there was no official communication from either HTIL or any of the aspirants, sources indicated that a formal announcement could be made on Monday.

Essar, which had put a bid along with the condition that it had the Right of First Refusal to enable it the option of matching the top bid, may be mulling the tag-along clause to sell its stake to Vodafone or its Indian associates.

Natural ally

There was, however, no communication from Essar, whose top brass is camping in London, Vodafone's headquarter, sources said.

It was indicated that delay in formal announcement could be on account of the last minute consultation on the position being taken by the Indian partner in the venture.
Hutch-Essar Valuation at $19bn

EV/EBITDA FY'07E
Hutch-Essar 18.4
Idea 16.5
Bharti 19.6
Rel Comm 17.3
Tata Tele 16.6


Both HTIL and Vodafone spokespersons did not respond to repeated queries on the reports of UK telecom firm's emergence as the top bidder.

During his recent visit to India to assess the regulatory and related issues, Vodafone's Sarin had said he was open to partner Essar.

He also dubbed the Indian conglomerate as natural ally because of their stake in Hutch-Essar.

Anil Ambani, chairman, Reliance Communications stated that the company would adopt conservative approach, was expected to come out with a statement later on Sunday night.

Tag-along right

Essar, by virtue of being the partner of Hong Kong firm in Hutch-Essar, has 21 days time to decide on whether to exercise its RoFR (matching the top bid) or the tag-along right (to sell its 33 per cent stake in the venture).

If Essar decides to sell its stake by exercising the tag-along right, it could fetch the company over $6 billion.

Hutchison Telecom first announced in December last year that it had been approached by various bidders for acquisition of its stake in the Indian venture.

This was followed by announcements by Vodafone, Reliance Communications, Essar Group and Hindujas expressing their interest for the stake on offer. (With PTI Inputs)


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