Takeover deal of Hutch by Vodafone

1. TAKEOVER DEAL OF HUTCH BY VODAFONE
Shailesh Kumar
Moumita Mukherjee
Naveen Trivedi
Virendra Singh Negi

2. VODAFONE
• Vodafone Group plc is a British company, with headquarters in
London.
• Globally Vodafone ranked fifth by revenue and second in the
number of connections close to 320 million as of 2019.
• Owns and operates networks in 25 countries and has partner
networks in over 47 additional countries.
• On 31st August 2018, Vodafone India merged with Idea and was
renamed as Vodafone Idea limited.
• The Vodafone holds 45.1% stake and Aditya birla group holds 26%
and remaining shares will be held by public.

3. HUTCH
• Hutchison Asia Telecommunications Limited, founded in 1985.
• Headquartered in Hong Kong.
• Owned subsidiary of Hutchison Whampoa.
• Hutch Essar was a leading Indian telecommunications mobile
operator.
• 23.3 million customers at 31 December 2006.
• National market share 16.4%.

4. Growth of Hutchison Essar
• 1992: Hutchison whampoa and Max group established Max Group.
• 2000: Acquisition of Delhi operation entered Kolkata and Gujarat
Market through ESSAR Acquisition.
• 2001: Won auction for incense to operates GSM Service In Karnataka,
Andhra Pradesh and Chennai.
• 2003: Acquired AirCel Digilink (ADIL- Essar Subsidiary) Which
operates in Rajasthan, Uttar Pradesh east and Haryana telecom circles
and renamed it under Hutch Brand.

5. • 2004: Launched its three additional telecom circles of India namely
Punjab, Uttar Pradesh and West Bengal.
• 2005: Acquired BPL, another mobile services provider in India
• 2007: Vodafone acquired HTIL stake in Hutchison Essar.
• Vodafone acquired Dishnet Wireless , a service provider in Orissa
and has launched its services in the following circles successfully .

6. Why everyone wants HUTCH
• The biggest one is a presence in a market of 143 million subscribers
that's growing at a mind-boggling rate of 5 per cent on a month-on
month basis, making it the fastest-growing cellular market in the
world. What's more, penetration levels are still low at 12 per cent (less
than 2 per cent in rural India), and as developed telecom markets slide
into saturation, India is clearly the geography where most of the long-
term potential is concentrated.
• Fourth largest mobile operator in India with 24.41 million subscribers
• 16.41% of the Indian mobile market.

7. • Present in 16 of 23 circles. Has license for six others barring Madhya
Pradesh.
• ARPUs at Rs 374 against national average of Rs 335.46.
• Hutch Mumbai ARPU at Rs 609.36, the highest in India, but yet to be
integrated.
• Accounted for 41 per cent of Hutchison Telecommunication
International’s revenues.
• Revenues of Rs 4,086 crore in H1 2006 against Rs 5,800 crore in 2005.
• Operating profits of Rs 1,017 crore, EBITDA margins at 32.7 per cent
in H1 2006.

8. MERGER DETAILS
• The partners have agreed that Hutchison Essar will be renamed
Vodafone Essar
• On February 11, 2007, Vodafone agreed to acquire the controlling
interest of 67% in Hutch-Essar for US$11.1 billion
• Deal size and stake Fourth largest deal of the year 2007 (to date) at
$13.3bn ($11.1bn plus $2bn debt). Hutchison Essar valued at
$18.8bn.

9. • The sale of its interests in India will enable Hutchison Telecom to
become one of Asia’s best capitalized companies.
• The Hutch Essar deal has netted him a neat $8.48 billion.
• As telecom valuations in India started rising, Essar tried to increase
its stake in the joint venture.
• The key players looking to acquire Hutchison Essar were the Essar
Group, Anil Ambani-owned Reliance Communications, the UK-
based Vodafone, and a string of private equity (PE) players.

10. STRATEGY GOAL BEHIND DEAL
• Emerging market focus
• Large players and competition in the market
• To provide superior shareholder returns.
• To leverage global scale and scope, especially in delivering 3G
services.
• To expand market boundaries.
• To build the best global Vodafone team.
• To be a responsible business and manage its impact on society, the
environment and economy.

11. Synergies Claimed
• Vodafone gets access to the fastest growing mobile phone market in
the world that is expected to touch 500 million subscribers by 2010.
• Cellular penetration in rural India is below 2%, but 67% of India’s
population lives in rural India
• Hutchison-Essar is not just the #4 player, but also one of the better
run companies with higher average revenue per subscribers.
• 3G is set to take off in India, allowing data and video to ride on
cellular networks. Vodafone already offers 3G elsewhere in the world.
• India is key to Vodafone strengthening its presence in Asia, a region
seen as the big telecom story.

12. CHALLENGES TO BE FACED
• The cellular telephony is extremely competitive, and India has one of
the lowest ARPUs in the world.
• It has an uneasy equation with Essar, which is one-third partner in
Hutch-Essar.
• The Vodafone brand is relatively unknown in the Indian marke which
will cause the brand to cost money and take time.
• Telecom valuations are at a high and this could mean it is year
Vodafone recovers its multi-billion dollar investment.

13. Benefits of the merger
• Accelerates Vodafone’s move to a controlling position in a leading
operator in the attractive and fast growing Indian mobile market.
• India is the world’s 2nd most populated country with over 1.1 billion
inhabitants.
• India is the fastest growing major mobile market in the world, with
around 6.5 million monthly net adds in the last quarter.
• India benefits from strong economic fundamentals with expected real
GDP growth in high single digits
• Increases Vodafone’s presence in higher growth emerging markets.

14. THANK YOU