M&a vodafone hutch_deal


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M&a vodafone hutch_deal

  1. 1. [Vodafone acquires Hutch.]<br />
  2. 2. Subject : Mergers & Acquisitions Project<br />Project : Vodafone Hutchsion Deal<br />In-charge : Ms. Neetika Batra<br />Students Engaged : Amit Puri 2012BLP013<br /> Anuj Thakur 2012BLP024<br /> Hersh Sharma 2012BLP049<br /> Janmaijai Dhayani 2012BLP037<br /> Karan Lalit 2012BLP026<br /> Kushagra Sharma 2012BLP023<br />
  3. 3. Graphical representation of M&As…<br />> Increasing Partner Commitment ><br />Vodafone Hutch Deal<br />Out<br />sourcing<br />Traditional M&A<br />Corporate Alliances<br />Solution JV<br />Partial<br />Partial<br />Acquisitions<br />Controlling<br />>=50%<br />Partial<br />Acquisitions Non Controlling<br /><=50%<br />Shared<br />resources &<br />competencies<br />Joint<br />Ventures<br />Licensing<br />Contract<br />Services<br />100% <br />Acquisition<br />Platform JV<br />Cross<br />Contractual Collaborative<br />> Increasing Degree of Integration ><br />
  4. 4. Why did Hutch wanted to exit ?<br /><ul><li> Urban markets in the country had become saturated.
  5. 5. Future expansion would have had to be only in the rural </li></ul> areas, which would lead to falling average revenue per user<br /> (ARPU) and consequently lower returns on its investment.<br /><ul><li> HTIL also wanted to use the money earned through this </li></ul> deal to fund it's business in Europe.<br /><ul><li> The sale of the its interest in India will enable HTIL to </li></ul> become one of the Asia's best capitalized company.<br />
  6. 6. Why Hutch ?<br />NationalRegional <br />
  7. 7. Why India ?<br />Let’s go back to Dec 2006…<br />Population in Million<br />Mobile penetration in %age<br />India is world’s 2nd most populated country…<br />….and mobile penetration was relatively very low.<br />Penetration expected to exceed 40% by 2012 and exceed by 50% in the longer run<br />
  8. 8. Why India ?<br />Let’s move ahead of Dec 2006…<br />250<br />24<br />19.9<br />18.3<br />20<br />200<br />16<br />12.8<br />150<br />Teledensity (in percent)<br />Subscribers (in million)<br />12<br />225.21<br />9.1<br />100<br />7.0<br />206<br />8<br />5.1<br />140.3<br />50<br />98.4<br />4<br />76<br />53<br />0<br />0<br />2002–03<br />2003–04<br />2004–05<br />2005–06<br />2006–07<br />2007–08 (as<br />of June<br />2007)<br />Telecom Subscriber Base<br />Teledensity<br />
  9. 9. Nature of Merger.<br /><ul><li> Horizontal Merger
  10. 10. Vertical Merger
  11. 11. Market-extension Merger
  12. 12. Product Extension
  13. 13. Conglomeration</li></ul>> Two companies that are in direct competition <br /> and share the same product lines and markets. <br />
  14. 14. Nature of Transaction.<br />
  15. 15. Key highlights of the Deal.<br /><ul><li> Acquisition of companies (Hutchison Telecom) that control Hutch Essar
  16. 16. Transaction consideration: $11.1bn (£5.7bn)
  17. 17. Implied enterprise value: $18.8bn (£9.6bn)
  18. 18. Partnership agreement with Essar
  19. 19. Vodafone has full operational control </li></li></ul><li>I wanna buy Hutch!<br />Vodafone<br />Reliance Communication<br />Essar<br />Hindujas<br />Orascom(Egypt's telecom giant)<br />
  20. 20. Financial Implications.<br /><ul><li> The Essar Group (“Essar”) currently holds a 33% interest in Hutch Essar and </li></ul> Vodafone will make an offer to buy this stake at the equivalent price per <br /> share it has agreed with HTIL<br /><ul><li> The estimated pre-tax gain from the sale is expected to be approximately </li></ul> $9 billion to Hutchison Telecom International Ltd<br /><ul><li> Vodafone to increase capital investment, particularly in the first two to three years
  21. 21. ROI exceeding the local risk adjusted cost of capital in the fifth year and an </li></ul> IRR of around 14%.<br />
  22. 22. Financial Implications. (contd.)<br /><ul><li> Vodafone will continue to hold its 26% interest in Bharti Infotel Private Limited </li></ul> (“BIPL”), which is equivalent to an indirect 4.4% economic interest in Bharti. <br /><ul><li> Vodafone and Bharti have entered into a MOU relating to a comprehensive range </li></ul> of infrastructure sharing options in India.<br /><ul><li> Vodafone's path towards building its Indian empire was far from easy. Numerous </li></ul> financial and regulatory roadblocks presented themselves. It had already made <br /> one foray into the market in 2005, when it bought a 10% stake in Bharti<br />
  23. 23. What could have been different ?<br /><ul><li> Some say > Vodafone may have overpaid for Hutchison Essar.
  24. 24. Per analysis > Vodafone actually overpaid by 30% to 45%.
  25. 25. According to analysis, the fair value of Airtel's mobile services is about Rs25,000 (about $600) per subscriber.
  26. 26. By contrast, Vodafone agreed to pay Rs35,000 per subscriber for Hutchison Essar.
  27. 27. Average revenue per user for Indian telecoms providers is Rs5,400, while the operating margin is around 32% or Rs1,728 per customer per year.
  28. 28. “It seems Vodafone will take a long time to break even in the Indian market”.
  29. 29. “Innovative services may give Vodafone an edge, but it will not be a significant one”.</li></li></ul><li>Legal Issues.<br /><ul><li> Alleged that with the purchase of a majority of shares of the Hutch by Vodafone, the FDI in </li></ul> the telecom service provider had crossed 89.03%.<br /><ul><li> FIPB seeks details on 15% stake held by minority shareholders AshimGhosh and Analjit</li></ul> Singh in its Indian mobile venture Hutch-Essar.<br /><ul><li> Court directs authorities to initiate prosecution under various sections of the Foreign </li></ul> Exchange Management Act (FEMA).<br /><ul><li>A petition against AsimGhosh- MD Hutch, and Analjit Singh, saying huge amount of </li></ul> funds were transferred through illegal routes to many countries. The stake is being held <br /> indirectly by the two individuals against Asim Gosh, MD Hutch, and Analjit Singh on <br /> behalf of Vodafone.<br />
  30. 30. Taxation Issues.<br /><ul><li> Vodafone was asked to pay 11,217.95 crore in taxes by IT </li></ul> authorities, the largest tax demand ever made.<br /><ul><li> Vodafone stated that both the foreign companies, that is </li></ul> Vodafone International Holding BV & Hutchison <br /> Communication International Ltd had happened outside India <br /> and hence overseas transaction cannot be taxed in India.<br />
  31. 31. Did Benefits Benefited ?<br /><ul><li> Vodafone is declared 80% growth in it’s customer base after 11 months of its acquisition of Hutch.
  32. 32. By 2009 it had 71.5 million subscribers (customer penetration at 34%).
  33. 33. Vodafone was declared the second largest mobile service provider by revenue in India. (2009)
  34. 34. In India it reported revenues of £2,689 million from £1,822 million in 2009 year ending.</li></ul>And they are still benefitting ><br /><ul><li> Vodafone India reported a growth of nearly 9 per cent in revenue to 1.03 billion pounds during the first quarter ended June 30, 2011.</li></li></ul><li>UP UP AND AWAAAYYYYYY…..<br />Thank You!!!<br />