Vodafone will acquire a majority stake in Hutchison Essar, winning a heated bid for control of the Indian mobile services operator.
Vodafone announced late yesterday that it has agreed to acquire companies that control a 67 percent stake in Hutchison Essar from Hutchison Telecommunications International, a subsidiary of Hong Kong's Hutchison Whampoa. Hutchison Telecommunications holds a majority stake in Hutchison Essar both directly and through a joint venture company in which Indian partners hold shares.
Vodafone will pay $11.1bn in cash for the acquisition, along with assuming $2bn in debt, through its subsidiary Vodafone International Holdings. The transaction is expected to close in the second quarter of this year, and is conditional to Indian regulatory approval, it said.
Hutchison's decision came over the weekend, after it evaluated bids from four key contenders including Indian mobile services provider Reliance Communications Ltd., the Hinduja Group of the UK, and India’s Essar Group, which holds 33 percent in Hutchison Essar, according to informed sources.
Vodafone will offer to acquire the Essar Group’s stake at the same price per share it is offering Hutchison, the company said. Indian regulations however do not allow foreign operators to hold more than 74 percent of the equity in an Indian telecommunications service provider. If the Essar Group sells its stake, Hutchison’s local partners, which together have a 15 percent interest in Hutchison Essar, will increase their interest to 26 percent, Vodafone said.
The Essar Group said in its statement late Sunday that it was evaluating an offer from Vodafone to be a partner. The Essar Group has the option to continue as an equity holder in Hutchison Essar or sell its stake along with Hutchison Telecommunications.
Vodafone has been seeking Hutchison’s stake since December last year, and in January the company’s chief executive, Arun Sarin visited India to press its case with the Indian government and business partners.
India is adding over 6 million new mobile subscribers every month. Hutchison Essar had 23.3 million customers as of December 31, 2006, which gave it a 16.4 percent market share.
Vodafone also offered on Sunday to sell its stake of 5.6 percent in Bharti Airtel, also a large Indian mobile services operator, to another company of the Bharti Group for $1.6bn, double the price for which it acquired the stake in 2005. It also announced a memorandum of understanding with Bharti Airtel for infrastructure sharing with Hutchison Essar.