1. Vodafone acquires control
of Hutch Essar
Presented by: Group 4
Submitted To: Aashay Singhal (08IB-002)
Amalendu Mukherjee (08IB-010)
Dr. R.L. Chawala Amit Kumar Jain (08IB-011)
Jaysurya Deb (08IB-019)
Devendra Garg (08IB-020)
International Business Nikhil T Zaveri (08IB-035)
Tapaswini Patra (08IB-056)

2. Hutchison Essar
 Established its presence in India1994.
 Acquired cellular license for Mumbai.
 Operations in 16 circles.
 Customer around 20 millions.

3. Vodafone Group Plc
• Vodafone Group Plc is the world's leading mobile
telecommunications company
• Significant presence in Europe, the Middle East, Africa, Asia
Pacific and the United States
• Group had 289 million customers till Dec, 2008
• The Company's ordinary shares are listed on the London
Stock Exchange and NYSE
• The Company had a total market capitalization of
approximately £74 billion at 31 December 2008.

4. Key highlights of acquisition
• Acquisition of companies (Hutchison Telecom) that
control Hutch Essar
• Transaction consideration: US$11.1bn (£5.7bn)
• Implied enterprise value: US$18.8bn (£9.6bn)
• Partnership agreement with Essar
• Vodafone has full operational control
• Avoidance of paying a control premium; liquidity rights
granted in years 3-4

5. Why Hutch was willing to sell its stake in
Hutchison Essar?
Aid in creating value in emerging mobile markets and realizing the
same for the benefit of shareholders at the right time
HTIL Suffers loss of HK$768 million in 2005
Will able to generate huge cash for launch of operations in
Vietnam and Indonesia
The Company did not declare any dividends for the year ended
31 December 2006.
These are speculations as HTIL has not been discloses the
reason for sale

6. • Why Vodafone interested to
acquire control in Hutch Essar??

7. India: Fastest Growing Free Market Democracy

8. Indian Telecom Sector
• Fastest Growing Sector – CAGR 22% (2002-07)
• Second Largest Telecom Market
– Lowest tariff charges in the world
– Wireless Subscribers – 315.3 Mn
– Wireline Subscribers – 38.4 Mn
– Tele-density – 30.6
• 23 Circles - 4 Categories ( Metro, A, B & C)
• Bharti Airtel – Largest player with presence in 23 Circles

9. Hutch Essar and Vodafone
Controlling interest in a major, fast growing market
Meets twin financial investment criteria
Strong management team with good cultural fit
Vodafone and Essar will derive greater value together

10. India: A very large market

11. Why Mad Rush for Telecom ??
Large number of additions Telecom
Low teledensity (depicting
in telecom subscribers Advantage
large untapped potential)
250 24
Teledensity (in percent)
Subscribers (in million)
18.3 19.9 20
200
16
12.8
150
9.1 12
225.21
7.0
100 206 8
5.1 140.3
50 98.4 4
76
53
0 0
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 (as
of June
2007)
Telecom Subscriber Base Teledensity

12. Indian mobile market

13. One of only 4 major mobile operators in India

14. Strong penetration growth potential
Penetration by circle category (Dec-06)
Nationwide penetration currently at 13%; expected to exceed 50% longer term

15. Hutch Essar Footprint and
Competitive Positioning
Source: Vodafone annual report 07-08

16. Business Propositions
• Critical first mover advantage in Mumbai/Delhi
• Well established National Corporate business – leading market share
• Investment required for SME/SOHO
• Only operator in India integrated into an international mobile
company
– international voice and data roaming
– unique offers for multinational corporate accounts
• Access to proven product portfolio
• Mobile office expertise

17. Rome was not built in a day
…So was Vodafone Essar!

18. Roadblocks during deal
&
International Business Angle

19. Regulatory Framework
 74% FDI Investment
ADC
 Lack of Transparency in
Spectrum & License
Allocation
 Deregulation virtually
Regulation
complete and Unified
Licensing regime
UASL USO
 3G Policy & MNP still
Pending

20. Hiccups and Stumbling Blocks
Stake Holders
HTIL(Whampoa group
Takes over
of Li-Ka Shing.
Vodafone(Briton)
Hong Kong
A Foreign company
A foreign company
67%
Essar group
Hutchison Essar
Asim Ghosh-12%
(Indian A.Singh and other companies
Company) (Minority)

21. Top Runners for Deal
Vodafone
Reliance Communication
Essar
Hindujas
Orascom (Egypt's telecom giant)

22. Essar was biggest hurdle in deal for Vodafone
• Relations between Hutchison and Ruias of Essar group have
never been cordial
• Hutch and Essar have gone to the courts and the government
several times in the last few years over
• Initially want complete control over company
• Essar wants equal partnership
• The Ruias -- who have decided not to sell their stake -- have
been looking at legal options to challenge the HTIL claim
• Opposed acquisition by Vodafone

23. Legal Issues
• Alleged that with the purchase of a majority of shares of the Hutch by
Vodafone, the FDI in the telecom service provider had crossed 89.03
per cent
• FIPB seeks details on 15% stake held by minority shareholders
Ashim Ghosh and Analjit Singh in its Indian mobile venture Hutch-
Essar
• Court directs authorities to initiate prosecution under various sections
of the Foreign Exchange Management Act (FEMA)
• A petition against Asim Ghosh- MD Hutch, and Analjit Singh, saying
huge amount of funds had been transferred through illegal routes to
various countries.

24. Legal Issues continued…
• The stake is being held indirectly by the two individuals
against Asim Ghosh- MD Hutch, and Analjit Singh on
behalf of Vodafone.
• The sale-breached India's Foreign Exchange
Management Act and the licensing conditions for
providing telecommunications services in India

25. EU pitches for Vodafone
European Union put pressure on Indian government
to give Vodafone a fair chance in Hutch deal
Quote Unquote quot;Any Indian company can
come and buy any business in
UK. We need to make sure it
becomes a two-way process”
“The Indian government must give the
UK based telecom
UK Secretary of State for Trade and
company Vodafone a fair chance in the
Industry Alistair Darling
bidding for a stake in the Indian mobile
service provider Hutch,”
The European
Union Trade, Commissioner Peter
Mandelson

26. September
21, 2007

27. September 21, 2007

28. Conclusion
Vodafone creating value in India
Controlling position in a leading operator with nationwide presence
Strong existing platform for growth
Additional value under Vodafone ownership
Increased Vodafone’s presence in high growth markets
Increased presence of big Global Players in India

29. References
http://www.trai.gov.in
http://www.vodafone.com
http://www.afaqs.com/perl/news/case_studies/index.html?mid=13
http://www.indiaprwire.com/pdf/news/20188.pdf
http://www.vodafone.com/start/media_relations/news/local_press_releases/india/vod
afone_essar_press/vodafone_is_here_.html
http://www.tonsetelecom.com/pdf%20files/B_E_Feb07.pdf
http://www.rediff.com/money/2007/mar/08hutch.htm
http://www.domain-b.com/companies/companies_v/vodafone/20070212_control.htm