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Presented by


Nayan Patel
Introduction

In 1992 Hutchison Whampoa and its Indian business partner


established a company that in 1994 was awarded a license to
provide mobile telecommunications services in Mumbai.

By the time of Hutchison Telecom's Initial Public Offering in 2004,


Hutchison Whampoa had acquired interests in six mobile
telecommunications operators providing service in 13 of India's 23
licence areas and following the completion of the acquisition of
BPL that number increased to 16.
Continued -

In 2006, it announced the acquisition of a company (Essar


Spacetel - A subsidiary of Essar Group) that held licence
applications for the seven remaining licence areas.

Then it also targeted business users and high-end post-paid


customers which helped Hutchison Essar to consistently
generate a higher Average Revenue Per User than its
competitors.
Continued
-

Vodafone maintains the 74 percent FDI limit.

Hutchison held 52 per cent, Analjit Singh and Asim Ghosh


together hold 15 per cent, while Essar holds 33 per cent.

In Essar’s stake, 22 per cent is held abroad (Mauritius) as a


foreign investor, and the balance 11 per cent as a domestic
investor. Technically, therefore, Vodafone can pick up another 22
per cent.
Continued
-

Hutch was often praised for its award winning advertisements


which all follow a clean, minimalist look. Its successful ad
campaign in 2003 featured a pug named Cheeka following a boy
around in unlikely places, with the tagline, W her ever y ou go ,
our ne twor k f ollo ws. The simple yet powerful
advertisement campaigns won it many admirers.

TV COMMERCIAL
Vodafon
e
Vodafone was formed in 1984 as a subsidiary of Racal
Electronics.

It was fully demerged from Racal Electronics Plc and became


an independent company in September 1991, at which time
it
changed its name to Vodafone Group.

Following its merger with AirTouch Communications, the


Company changed its name to Vodafone AirTouch on 29 June
1999 and, following approval by the shareholders in General
Meeting, reverted to its former name, Vodafone Group,
Continued
-
Vodafone announces agreements with both Microsoft and
Yahoo! to bring seamless Instant Messaging services to the
mobile which can be accessed from both the PC and mobile
handsets.

With Google, Vodafone announces its intention to develop a


location-based version of Google Maps.

With eBay, Vodafone announces it is to offer the new eBay


mobile service to customers.
Continued -

Arun SarinGets Stumped!, emphasises Vodafone’s


foray into emerging markets like Turkey, Romania,
Africa and India.

At a time, when Vodafone was eager to make a


mark in India – world’s fastest-growing mobile
market – Hutchison Telecommunications
International Ltd. offered to sell off its majority
stake in Hutchison Essar.
Why Take Over
Vodafone need -

Vodafone wants to expand into the asian markets. India has


2nd largest merket for mobile. It is growing at the rate of 6
million subscribers per month.

hutch want to sell –

Major Reasons for sell are :

Hutch-Essar : mutual distrust

The right time to quit Indian operations to finance other


operations. Li Ka-Shing was the 10th richest man globally in
2006. In the early 1990s, he sold his stake in Star TV to
Rupert Murdoch for $825 million.
Hutch Hutch Hutch
The biggest one is a presence in a market of 143
million subscribers that's growing at a rate of 5 per
cent on a month-on-month basis

Fourth largest mobile operator in India with 24.41


million subscribers

16.41% of the Indian mobile market, present in 16 of


23 circles.

Accounted for 41 per cent of Hutchison


Telecommunication International’s revenues

Revenues of $908 million (Rs 4,086 crore) in H1 2006.


Operating profits of Rs 1,017 crore.
Contenders in race

 Essar Group

 Anil Ambani-owned Reliance Communications

 The UK-based Vodafone

 Private equity (PE) players.

 Malaysia’s Maxis Communications

 Egyptian Telco Orascom


Valuation

 Average Revenues per User

 It had the highest ARPUs – Rs 374(Avg Rs335)

 perspective of the buyer

 market share

 $54.8 billion Vodafone bagged Hutchison Essar, it


valued the company at $18.8 billion or $770 per
subscriber
Valuation of hutch essar

-Value ($ billion)

-Hutch Essar 100% enterprise value: 18.8

-0Hutch Essar debt: 1.33

-Equity Value: 17.47

-Value of 67% stake: 11.10

-Other Debt: 0.63

-Net Value: 11.08


Financing the deal

 least leveraged

 $5 billion from the sale of its Japanese unit

 $1.62 billion cash from its 5.6 per cent stake sale
in Bharti.

 cash reserves in excess of $3 billion.

 sold its 25 per cent stake in Swisscom Mobile and


exited Belgium
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
Hurdles of the deal

 Telecom Watchdog, a non-governmental group,


which alleged breach of foreign direct investment
regulations.

 Ministry suggesting appointment of inspectors to


investigate the actual ownership of mobile
services company Hutchison Essar.

 The Foreign Investment Promotion Board (FIPB)


had earlier sought the views of Law Ministry
about Vodafone's proposed acquisition of
Hutchison Telecommunication International Ltd's
stake in the Indian mobile company.
Men behind the
deal
Superman' Shing at home in
Hong Kong, 78-year-old Li
Ka Shing is famed for his
ability to exit businesses at
the right price. His deal with
Vodafone, would give him
$11.1 billion, a coup
considering he entered the
Indian entity for as little as
$2.6 billion.

Li Ka Shing, Chairman, Hutchison


Whampoa.
Vodafone's CEO since 2003,
Sarin's bid would give him
access to 24.4 million
customers in one of the
world's biggest and fastest
growing markets.

Arun Sarin, CEO,


Vodafone
He had earlier claimed that his group
would be able to raise adequate cash to
acquire Hutchison's stake in Hutch-
Essar.Today Ambani said that his bid was
on lines of `financial conservatism' as
articulated earlier, in the face of
`challenging valuations'.

Anil Ambani, Chairman,


Reliance - ADAG
Li Ka Shing may call the shots in
the Vodafone-Hutch deal. But 55-
year-old Canning Fok is the man in
the hot seat. Canning is best known
for his push towards exiting the 2G
space by selling out Orange in
1999, and using the $20-billion plus
profits almost directly into 3G.

Canning Fok, Chairman, Hutchison Telecom


International Ltd
D.Durai

focuses on mergers and acquisitions, real


estate and technology law. His
experience in the telecom, technology
and media sectors includes assisting in
domain name disputes, advising on
patent strategy, drafting online trading
rules for a stock exchange, and
negotiating the procurement of a telecom
networ.
Immediate challenges

The cellular telephony is extremely


competitive,and India has one of the lowest
ARPUs in the world. Besides, ARPU growth is
slowing.

• It has an uneasy equation with Essar, which is


one-third partner in Hutch-Essar. Tht could be a
source of problem.

• The Vodafone brand is relatively unknown in the


Indian market. Besides the brand will cost money
and take time

• Telecom valuations are at a high and this could


mean it is years Vodafone recovers its multi-
billion dollar investment

• Its big competitors are home-grown majors, who


Straregy to go ahead

 Rebranding

 Operations

 Essar’s option