New Delhi: Mobile company Hutchison Essar is in troubled waters. Analysts urged company’s shareholders to set a higher price in case it makes an exit from India's vibrant telecom sector.
In the latest twist to a $17 billion takeover tussle, Hutchison Essar's 33 percent shareholder, Essar group, approached one potential bidder, Britain's Vodafone Group Plc, about a carve-up deal.
Other reports have said Essar wants to buy out the whole business in a deal valuing Hutchison Essar at $17-$18 billion, while the Financial Times reported that Vodafone had made a solo bid with a similar valuation.
Hutchison Telecommunications International relies on India as its 67 percent stake holder Hutchison Essar contributes to an estimated four-fifths of operating income. The Hong Kong firm is expected to end 2006 in the black after a hefty 2005 loss.
Meanwhile Hutchison Essar is poised to ride on swelling demand growth over the next half-decade. Analysts say the company’s mobile penetration in India could double over the next two years from the present 12 percent figure, and in fact triple in the next four years.
In fact the company’s India operations expects reaching out to 180 million mobile phone users by end-2007, up more than 25 percent from 143 million now.
"We would be surprised if HTIL were interested in exiting its Indian telecom business at this time," Goldman Sachs analyst Helen Zhu argued in a report last week. "That being said, we consider HTIL and its parent company Hutch Whampoa to be likely sellers at the 'right' price."
Hong Kong-based Hutchison Telecom has been an avid deal-maker across Asia. But long-cherished hopes of listing its Indian business have been hampered by regulatory changes amid a dispute over local acquisitions with partner Essar, a conglomerate controlled by India's Ruia family.
Essar, Hutchison Telecom and Vodafone all declined to comment on Thursday, although Vodafone has confirmed it is considering making an offer, and both Hutchison Telecom and its parent, billionaire Li Ka-shing's Hutchison Whampoa, have confirmed receipt of approaches.
Buying Hutchison Essar would boost Vodafone in a market where its existing interest is limited to a 10 percent stake in industry leader Bharti Airtel Ltd.
Business Standard reported on Thursday that Bharti would start talks on "disengagement" from Vodafone when the UK company had firmed up a plan for India. Hutchison Telecom shares have benefited from all the talk.
With agencies inputs
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