Vodafone Acquires Control Of Hutch Essar Group4 Ib


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Vodafone Acquires Control Of Hutch Essar Group4 Ib

  1. 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. 2. Hutchison Essar  Established its presence in India1994.  Acquired cellular license for Mumbai.  Operations in 16 circles.  Customer around 20 millions.
  3. 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. 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. 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. 6. • Why Vodafone interested to acquire control in Hutch Essar??
  7. 7. India: Fastest Growing Free Market Democracy
  8. 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. 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. 10. India: A very large market
  11. 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. 12. Indian mobile market
  13. 13. One of only 4 major mobile operators in India
  14. 14. Strong penetration growth potential Penetration by circle category (Dec-06) Nationwide penetration currently at 13%; expected to exceed 50% longer term
  15. 15. Hutch Essar Footprint and Competitive Positioning Source: Vodafone annual report 07-08
  16. 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. 17. Rome was not built in a day …So was Vodafone Essar!
  18. 18. Roadblocks during deal & International Business Angle
  19. 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. 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. 21. Top Runners for Deal Vodafone Reliance Communication Essar Hindujas Orascom (Egypt's telecom giant)
  22. 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. 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. 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. 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. 26. September 21, 2007
  27. 27. September 21, 2007
  28. 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. 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