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Vodafone has announced a new 12-member board to take charge of its recent acquisition target, Indian mobile operator Hutchison Essar, reports the Economic Times following the company’s first meeting in India. Ravi Ruia, vice-chairman of the Essar group, will be chairman of the board, while Arun Sarin, Vodafone CEO, will be the vice-chairman. Asim Ghosh is the MD while Max India chairman Analjit Singh and CR Dua are independent directors. The new board has eight Vodafone representatives and four Essar nominees. No date has been fixed for changing the Hutch brand name to Vodafone but an announcement is expected very soon. Vodafone plans to invest USD 2 billion in India in 2007 for expanding its business. Vodafone-Essar is looking to add over 1.5 million subscribers a month during the current financial year, or 18 million new customers in a year. The company’s new monthly target translates into 65 percent growth in subscriber numbers. Simultaneously, the company announced a 50 percent reduction in the minimum monthly recharge required for a prepaid customer to INR 99 from the earlier INR 199 effective 16 June. To gain consumers and market share, Vodafone will also introduce low-cost handsets. The company is also looking at infrastructure-sharing in India and is in talks with other mobile firms.

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Telegeography writes…Reliance Communications, India’s second-largest wireless network operator, has reported that its fourth-quarter profit more than doubled from INR4.03 billion (USD97.8 million) to INR10.2 billion (USD247 million). Sales in the three months ended 31 March 2007 rose 33% to INR39.4 billion, compared to the INR29.7 billion reported in the same period a year earlier.

Billionaire Chairman Anil Ambani revealed plans to spend USD2.5 billion this year extending Reliance’s GSM network, after losing out to Vodafone Group in a battle for control of India’s fourth-largest carrier Hutchison Essar. The company, which also operates an extensive CDMA-based network, is expected to spend about a USD1 billion to expand its GSM network to the 15 states in which it does not currently have coverage. Reliance Communications’ mobile subscriber base rose to about 28 million at the end of March; the company added 1.2 million new users in March alone, and its overall customer base, including fixed-line and broadband users, exceeded 30 million.

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Inhome.Rediff writes…The bidding war is heating up for Hutchison Essar, India’s fourth largest cellular company. Britain’s Vodafone Group kicked off the scramble last month when it signaled interest in acquiring the Indian affiliate of Hong Kong-based Hutchison Wampoa.

Since then, the list of potential buyers has grown to include India’s second-largest mobile operator, Reliance Communications, and Indian conglomerate Hinduja Group. Even Essar Group, which currently owns one-third of Hutchison Essar, may make a bid.

It’s easy to see why everyone wants in-and why the rumored price tag has climbed into the range of $18 billion to $20 billion. Although China is the world’s largest mobile-phone market, with nearly a half-billion customers, India recently overtook it as the world’s fastest-growing. More than six million new users signed on in India in December alone.

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The country’s six main mobile operators now share 150 million customers, nearly double the number a year earlier. But with India’s population topping 1.1 billion, that translates to penetration of just 14%. Market researcher Gartner figures the customer base should double again by 2010.

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For Vodafone and its India-born chief executive Arun Sarin, the stakes have never been higher. With growth slowing in its core European markets, the world’s largest wireless operator is turning, as never before, to developing economies.

The company figures its revenues from emerging markets will grow at an annualized rate of more than 12% between now and 2010, vs. just 4% annual growth in Europe, where penetration is near saturation.

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Vodafone already owns a 10% stake in India’s No. 1 mobile operator, Bharti Airtel. But the British giant doesn’t stand a chance of taking majority control because Bharti’s main shareholders aren’t selling. Instead, Vodafone is expected to divest its Bharti stake to acquire Hutchison Essar, whose primary owner is selling out to fund other ventures.

“With limited growth prospects in Vodafone’s core European markets, Sarin’s No. 1 job right now is to convince investors that he has a viable long term growth strategy,” says John Delaney, principal analyst at telecom consultancy Ovum in London. “And gaining control of a fast-growing operator in India is the best opportunity he has to do it.”

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Convergence writes…At the end of December 2006, India has 146.1 Million Mobile subscribers. [40.7 Million CDMA + 105.4 GSM].

Top 5 Mobile Service Providers in India [GSM and CDMA]:

Bharti Airtel Ltd - 31.2 Million subscribers
Reliance Communications Ltd - 29.7 Million subscribers [26.3 Million CDMA + 3.4 Million GSM]
BSNL Cellone - 23.61 Million [Excludes MTNL in Mumbai and Delhi]
Hutchison Essar - Hutch - 19.06 Million [Excludes BPL Mumbai]
Tata Indicom Mobile - 14.4 Million [All CDMA]
Top 5 GSM Service Providers in India

Bharti Airtel Ltd - 31.2 Million subscribers
BSNL Cellone - 23.61 Million [ Excludes MTNL in Mumbai and Delhi ]
Hutchison Essar - Hutch - 19.06 Million
Idea cellular Ltd - 12.43 Million
Reliance Telecom - 3.3 Million
For the quarter ended Dec-2006, Bharti-Airtel and Reliance Telecom saw a marginal increase in market share at the cost of Idea Cellular and BSNL. According to Macquire Research, Indian wireless subscriber base is all set to touch 400 Million, while Citigroup Investment Research has revised the figure to 387 Million from 365 Million for 2010.

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InfoWorld writes…India added close to 74 million new mobile telephone subscribers last year, making it one of the most attractive markets for mobile telephone operators and wireless equipment vendors.

The number of wireless subscribers grew 97 percent from 75.94 million at the end of December 2005 to 149.5 million subscribers at the end of December last year, according to the Telecom Regulatory Authority of India (TRAI) in Delhi.

The growth in the mobile telephony market has come after deep cuts in tariffs by mobile services operators, which cut into the average revenue per user (ARPU). Mobile service operators are now focusing on new services such as e-mail and music downloads to boost ARPU.

The country added 6.48 million mobile subscribers in December, while in November it added 6.80 million subscribers, TRAI said Monday.

Even as the mobile telephony market in India is booming, the number of fixed-line telephone subscribers dropped, suggesting that first-time users of telephones are opting for mobile phones. The number of fixed-line subscribers was down to 40.43 million in December as compared to 48.84 million a year ago, according to TRAI.

The Indian government is targeting 500 million telephones, both fixed and wireless, by 2010. Based on current trends, most of the demand for new connections is likely to come for mobile services.

The large growth in mobile subscribers in India has attracted foreign companies to invest in providing mobile services in the country. A recent relaxation of government rules allows foreign companies to hold up to 74 percent stake in a mobile services operators.

British mobile services operators Vodafone Group is for example bidding for the majority share of Hutchison Telecommunications International in Indian operator Hutchison Essar. But it may not be easy going for Vodafone, as there are a number of Indian and foreign bidders for Hutchison’s stake.

Multinational wireless equipment makers like Nokia, Telefonaktiebolaget LM Ericsson, and Motorola have set up manufacturing facilities in India after a large government-owned service provider, Bharat Sanchar Nigam Ltd. (BSNL) started insisting that its suppliers manufacture a part of their products locally. The Indian government is keen on promoting local manufacturing in India, as it finds that the business process outsourcing (BPO) and software outsourcing boom in the country has not brought benefits to semi-skilled workers.

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EconomicTimes writes…BPL Mobile Communications has increased the capex for this year to Rs 200 crore. The telco, in which the Essar group owns 9.9%, will also refinance loan of Rs 700 crore in the next two months. “We are working on re-financing our Rs 700-crore debt. It should happen in the next two months.

Part of the expansion will be funded from this debt and the rest from internal accruals,� BPL Mumbai CEO S Subramaniam told ET. The refinancing could be done by the current bankers, which are IDBI, ICICI and IDFC.

However, Mr Subramaniam refused to comment on details. The company had announced a capex of Rs 100 crore in August last year. “We are doubling it up because we have to invest more to keep pace with the growth,� he said.

The increase in investment is significant as it is being viewed as yet another attempt at building value in the circle ahead of a possible sale. According to sources, the proposed merger of BPL Mobile with Hutchison Essar (HEL) has been called off and the Ruias will continue to manage the circle as of now.

With the new investment, BPL will nearly double the number of base stations from 600 to over 1,100 by September this year. BPL Mobile has roped in Motorola for providing telecom equipment.

The telco, with around 11 million users, is also replacing the existing IN networks. Comverse, an Israel-based mobile communications software maker, is providing the new IN networks. Also in the pipeline are new value-added services, upgradation of call centre and a branding exercise for BPL.

Mr Subramaniam said BPL Mobile reported Rs 106-crore revenue in the quarter ended September ‘06. “We expect to be at Rs 121 crore in the October-December quarter,� he added.

He said. BPL’s current subscriber capacity is around 14 lakh and it plans to have 18 lakh lines in place by December ‘07. Other operators in Mumbai market are Hutchison Essar, Bharti Airtel, MTNL, Reliance Communications and Tata Teleservices.

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MarketWatch writes… India’s Hinduja Group said Friday it expects to start due diligence of Hutchison Essar Ltd.’s books next week as part of its plan to acquire the Indian mobile phone service operator.
“The date hasn’t been decided as yet, but we expect it (the due diligence) to start next week,” A.K. Das, vice-chairman of the Indian business, conglomerate told Dow Jones Newswires.
He confirmed media reports that the group has tied up funding for the proposed stake bid, but didn’t provide additional details.
Hutchison Essar, the country’s fourth-largest mobile service provider by subscribers, is 67%-owned by Hong Kong-listed Hutchison Telecommunications International (2332.HK), a unit of Hutchison Whampoa Ltd. (HUWHY), and 33%-owned by India’s Essar Group, which is controlled by the Ruia family.
The Hinduja Group had earlier expressed interested in buying a majority stake in Hutchison Essar.
Other companies in the fray for Hutchison Telecommunications’ stake in Hutchison Essar include Essar Group, the U.K.’s Vodafone Group Plc. (VOD.LN) and Reliance Communications Ltd. (532712.BY), India’s second-largest mobile phone company by subscribers.

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ContraCostaTimes writes…Reliance Communications, India’s second-largest mobile phone company, began lobbying the government Thursday for a chance to bid for rival Hutchison Essar, a day after Britain’s Vodafone said it wanted a controlling stake in the company.

Reliance Communications Ltd. Chairman Anil Ambani met Finance Minister P. Chidambaram and Communications Minister Dayanidhi Maran to discuss the matter, officials in the two ministries said. The officials spoke on condition of anonymity because of the sensitive nature of the issue.

Shares of Reliance Communications rose 4.8 percent to 426.90 rupees in Thursday’s trading on the Bombay Stock Exchange.

Ambani refused to speak to journalists after the talks.

His meetings came after the board of Reliance Communications on Wednesday authorized him to raise funds and “take all necessary steps” for a possible acquisition of Hutchison Essar Ltd., a joint venture between Hong Kong-Based Hutchison Whampoa and India’s Essar Group.

Hutchison and its associates hold 67 percent in the company and want to exit.

On Wednesday, Vodafone Group PLC Chief Executive Arun Sarin said the world’s largest mobile phone company hopes to make a formal bid for Hutchison’s controlling stake in the Indian company in early February.

Vodafone emerged as a front runner last week after making an approach that reportedly valued all of Hutchison Essar Ltd. at between $17 billion and $18 billion, which would make it the biggest-ever corporate takeover in Indian history.

Sarin, who met with top government officials Wednesday, refused to comment on any offer price or details of how the company planned to raise money for the proposed acquisition.

A successful acquisition of Hutchison Essar would help Vodafone gain a strong presence in one of the world’s fastest growing mobile phone markets.

It is also a crucial move for Sarin, who has come under fire from shareholders in recent months for a lackluster performance of Vodafone’s stock and a widespread perception that the company still lacks a credible strategy for further growth.

As of Nov. 30, Hutchison Essar accounted for 16 percent of India’s 143 million mobile and wireless phone connections. India has been adding 4 million or more new connections each month over the past one year.

Sarin told reporters Thursday that his company went to several Indian firms to partner in a possible bid.

India doesn’t allow foreign companies to hold more than 74 percent equity in a telecommunications venture. If the Essar Group, which holds 33 percent stake in Hutchison Essar, also decides to sell its stake, any foreign buyer of the enterprise will have to rope in a local partner.

Sarin declined to name any potential Indian partner.

For Reliance Communications, a successful bid will make it the leader of the country’s booming mobile phone market.

The company has appointed JP Morgan Chase and two other investment banks to scrutinize the books of Hutchison Essar, said the Dow Jones Newswires quoting an unnamed industry source.

Besides Vodafone and Reliance Communications, the London-based Hinduja brothers also have expressed interest. Malaysia’s Maxis Communications and Egypt’s Orascom Telecommunications are also reported to be in the race.

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After months of rumor, innuendo and articles based on anonymous sources Associated Press has reported that Vodafone CEO Arun Sarin “said that his company will soon make a firm bid for Hong Kong-based Hutchison Whampoa’s controlling stake in a leading Indian mobile phone company�. He’s in India at the moment talking to the government about a purchase (there are issues with the level of foreign ownership of Indian companies), and has reportedly approached Hutchison with an offer that values the Indian operations at between $17-18 billion. Some Vodafone shareholders have expressed concern that the company will get caught up in a bidding war that will see it overpay for Hutchison Essar, so it will be tricky for Sarin to raise that offer if he needs to.
Essar, the minority partner of Hutchison Essar, is also interested in bidding and claims it has first right of refusal. Hutchison Whampoa disputes this, claiming that “Essar’s right of refusal ‘exists in a limited case of a sale to certain specific Indian telecom operators…Essar has ‘no right of first refusal over any other buyers’.â€? Essar claims it has first refusal rights against any bid, which seems to set the stage for a legal showdown. 
The other parties interested in bidding are Reliance Telecommunications (India’s second-largest mobile company) and the Hinduja Group (also looking for a stake in Telecom Italia) from India, while Maxis Communications of Malaysia and Orascom of Egypt have also expressed an interest. Private equity groups have probably pulled out, saying they would not bid more than $15 billion.
Vodafone’s formal bid will be some time in February if Sarin gets his way.

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India’s Hinduja Group said Friday it expects to start due diligence of Hutchison Essar’s books next week as part of its plan to acquire the Indian mobile phone service operator.

“The date hasn’t been decided as yet, but we expect it (the due diligence) to start next week,” A.K. Das, vice-chairman of the Indian business, conglomerate told Dow Jones Newswires.

He confirmed media reports that the group has tied up funding for the proposed stake bid, but didn’t provide additional details.

Hutchison Essar, the country’s fourth-largest mobile service provider by subscribers, is 67%-owned by Hong Kong-listed Hutchison Telecommunications International, a unit of Hutchison Whampoa, and 33%-owned by India’s Essar Group, which is controlled by the Ruia family.

The Hinduja Group had earlier expressed interested in buying a majority stake in Hutchison Essar.

Other companies in the fray for Hutchison Telecommunications’ stake in Hutchison Essar include Essar Group, the UK’s Vodafone Group and Reliance Communications, India’s second-largest mobile phone company by subscribers.

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