Hutchison Telecom favours bid by Vodafone

PUBLISHED : Friday, 02 February, 2007, 12:00am
UPDATED : Friday, 02 February, 2007, 12:00am

World's largest mobile-phone firm and Reliance front runners for Indian unit

Hutchison Telecommunications International, a subsidiary of Hutchison Whampoa, favours potential bids from Reliance Communications and Vodafone Group for its Indian unit, market sources said.

Hutchison Telecom was waiting for Vodafone, the world's largest mobile-telephone company, to finalise a bid structure before they make a general call for offers, market sources said.

Vodafone would complete due diligence on the deal next week, a source said.

'Vodafone is the foreigner and they are the guys who have to weigh up the structural risk of what is left behind onshore,' a source said.

Vodafone planned to submit a bid for Hutchison Essar in a few weeks, the British company's chief executive Arun Sarin said on January 10. Mr Sarin said at the time Vodafone was willing to partner with India's Essar Group in any bid.

An acquisition of Hutchison Essar by Vodafone at less than US$20 billion was 'very positive', Westhall Capital analyst Cyrus Mewawalla said.

Hutchison Telecom holds 67 per cent of Hutchison Essar, India's fourth-largest mobile-telephone company by subscribers. Essar Group, an Indian conglomerate whose businesses range from shipping to energy and telecommunications, holds the remainder.

Hutchison Telecom intended to identify a preferred bidder by Lunar New Year, sources said.

Hutchison Essar has drawn interest from Indian and foreign players who have valued the unit at between US$14 billion and US$18 billion. The domestic parties include Essar and Reliance.

Hinduja Group, an Indian conglomerate active in the oil, media and banking sectors, has also indicated interest in Hutchison's stake in the mobile firm.

The company denied Indian media reports yesterday that it had withdrawn from the process, Reuters reported. Executive chairman Ashok Hinduja said the company would start due diligence on Essar on Monday.

Hutchison Essar is drawing buyers as the number of mobile subscribers in India is expected to surge amid rising incomes and strong economic growth.

The large number of young people, who are more receptive to third-generation mobile telephones, also look appealing to mobile firms aiming to expand in India.

Indian law allows a foreign company to own up to 74 per cent of any telecommunications firm, compared with the 49 per cent cap on firms in other industries.

Hutchison Telecom shares fell 1.06 per cent yesterday to HK$18.60.