Vodafone Says It May Buy India’s Hutchison Essar
Vodafone Group Plc, the world’s largest mobile-phone company, may make an offer for “a controlling interest” in India’s Hutchison Essar Ltd. to gain access to the world’s fastest-growing wireless market.
The process is “at an early stage” and may not lead to a transaction, Newbury, England-based Vodafone said in a Regulatory News Service statement today.
Vodafone may face competing bids for the company, India’s fourth-biggest wireless operator and a unit of billionaire Li Ka- shing’s Hutchison Telecommunications International Ltd. Blackstone Group LP and Reliance Communications Ltd., India’s second-largest mobile-phone company, asked banks led by Citigroup Inc. and UBS AG to lend almost $15 billion to fund a buyout of Hutchison Essar, bankers with direct knowledge of the deal said.
“India fits nicely with Vodafone’s focus on large and fast- growing markets and Hutchison Essar would allow them to get control of a fast-growing player in that market,” said Philippe Kiewiet de Jonge, who helps manage about $635 million, including Vodafone shares, at ABN Amro Asset Management in Amsterdam.
India is the world’s fastest-growing wireless market and only 17 percent of its 1.1 billion people have either a mobile or a fixed-line phone, according to the country’s phone regulator.
Shares of Vodafone fell as much as 1.75 pence, or 1.2 percent, to 142 pence, and traded at 142.25 pence as of 10:04 a.m. in London. Before today, they were up 15 percent this year.
Emerging Markets Strategy
Vodafone is abandoning saturated markets or where it doesn’t have majority stakes. The company last month sold its 25 percent stake in Proximus in Belgium. Earlier this week, Vodafone agreed to sell its entire quarter stake in Swisscom AG’s mobile unit. It has stakes, ownership and partnerships with companies in emerging markets including Turkey, Egypt, South Africa, China and Romania.
The U.K. company this month told investors it would like to raise its 10 percent holding in India’s Bharti Airtel Ltd.
“India is a strong market for growth, but the prices reflect that. This doesn’t look cheap at the moment,” said Morten Singleton, an analyst at WestLB in London. “If we enter a bidding war, Vodafone will either end up overpaying or lose and soil its relationship with its Indian partner Bharti.”
Hutchison Essar would be the largest purchase for Vodafone Chief Executive Officer Arun Sarin. Vodafone’s board agreed to pursue a bid of more than $13.5 billion, the Financial Times reported today.
Vodafone said in its statement that buying into Hutchison Essar would be consistent with its “stated strategy of seeking selective acquisition opportunities in developing markets.”
`Interested Parties’
Hutchison Telecommunications has been approached by “various potentially interested parties regarding a possible sale of its equity interests in Hutchison Essar,” the Hong Kong- based company said in a PR Newswire statement. “No agreement in respect of such possible sale has been entered into.”
The company reiterated “there is no assurance that a sale may result from these approaches.”
Hutchison Telecommunications owns 67 percent of Hutchison Essar, while India’s Essar Group owns the remainder.
“There is currently not much coordination between the two shareholders in Hutchison Essar, so the company may benefit from better management and increased capital commitments if Vodafone gains control,” said Vikash Mantri, an analyst for SBI Capital Markets Mumbai.
Shares of Hutchison Telecommunications rose 62 H.K. cents, or 3.5 percent, to HK$18.28 in Hong Kong.
Source- us.rd.yahoo Wireless Mobile Telecom
