Hutchison Whampoa

Hutchison to decide on Essar bidders by Lunar New Year

PUBLISHED : Tuesday, 09 January, 2007, 12:00am
UPDATED : Tuesday, 09 January, 2007, 12:00am

Hutchison Whampoa, which is selling a controlling stake in its Indian mobile-telephone unit that is valued at as much as US$18 billion, plans to select a preferred bidder before the Lunar New Year holiday, market sources said.

Hutchison has attracted four interested parties so far from domestic and foreign players who valued the Indian unit, Hutchison Essar, at between US$14 billion and US$18 billion.

No formal bids had been submitted, the sources said. Hutchison did not return telephone calls seeking comment.

Hutchison subsidiary Hutchison Telecommunications International owns 67 per cent of Hutchison Essar, India's fourth-largest mobile-telephone company by subscribers. The remainder is held by India's Essar Group, which is involved in shipping, energy and telecommunications.

'The Indian mobile market offers the most sought after telecoms assets in the world because it has extremely low market penetration, rising incomes and attractive demographics - its population is markedly skewed towards younger people, who spend more on high margin mobile data services such as video clips,' said Cyrus Mewawalla, an analyst at broker Westhall Capital.

'Moreover, unlike China, India's telecommunications operators can now be majority owned by foreign operators. That makes Indian telecoms an extremely attractive market for mergers and acquisitions.'

Essar was arranging debt financing of more than US$10 billion that would take the form of a high-yield bond, sold in the international market, and a loan, the sources said.

Essar is talking to a number of banks including Morgan Stanley, Citigroup and Merrill Lynch over potential financing.

Reliance Communications, the second-largest mobile-telephone operator in India, was arranging a bridge loan of about US$15 billion that would then be taken out with a combined high-yield bond and loan, the sources said.

Banks including JP Morgan, Calyon Corporate & Investment Bank, Barclays, Deutsche Bank and HSBC will provide the funds.

The loan to take out any bridge financing would cost Reliance about 300 basis points more than the London interbank offered rate, the sources said.

Private equity players such as Kolhberg Kravis Roberts, Blackstone Group, Carlyle Group and Apax Partners are also interested in teaming up with Reliance.

'Reliance will likely sell down a stake in Essar to private equity funds but whether that is now or later is open to question,' a source familiar with Reliance said. 'They'll do that when they're ready.'

Vodafone Group, the largest mobile-telephone operator in the world by revenue, said earlier it was interested in buying Hutchison Essar.

Hinduja Group, an Indian conglomerate active in the car, oil, media and banking sectors, has also said it would like to buy the Hutchison Essar stake.

Malaysia's Maxi Communications has dropped out of the bidding.