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Hutchison Whampoa, the Hong Kong-based conglomerate that is considering selling its 67 per cent stake in Hutchison Essar, has signalled it will only entertain offers well in excess of $14bn for the Indian mobile phone operator.
Frank Sixt, Hutchison Whampoa’s finance director, dismissed an indicative offer of $13.5bn for Hutchison Essar made this month by Texas Pacific Group, a private equity firm, and Maxis, a Malaysian mobile operator.
“That is not a valuation that would excite us,” Mr Sixt told the Financial Times. “A lot of people are interested in having an Indian asset. We have one which we are very pleased with. And really there has not been anything that would rise to the level of being an offer capable of acceptance.”
He was speaking before Hutchison Telecommunications International, a subsidiary of Hutchison Whampoa that holds the 67 per cent stake in Hutchison Essar, said last week that it had been approached by “various potentially interested parties” about selling its equity interests in the Indian mobile operator.
Hutchison Essar is India’s fourth-largest mobile operator, and analysts have estimated its enterprise value at about $14bn.
Vodafone, the world’s biggest mobile operator by revenue, said last week that it was considering the acquisition of a controlling stake in Hutchison Essar.
But a bidding war is likely because Reliance Communications, India’s second-largest mobile operator, is talking to at least four private equity firms about combining forces to make an offer for Hutchison Essar.
The remaining 33 per cent of Hutchison Essar, which uses 2G mobile technology, is held by Essar, an Indian conglomerate.
Meanwhile, Mr Sixt scotched speculation that Hutchison Whampoa might be tempted to quickly sell its 3 group of mobile businesses, which use 3G technology and recorded losses before interest and tax of HK$36.3bn in 2005.
“I think we are in these for the long term,” he said. “Could they be sold at some point? Yes, but only if in doing so we were creating significant value for our shareholders.”
Hutchison Whampoa had to abandon its target for the 3 group to report positive earnings before interest, tax, depreciation and amortisation during 2006 after its UK business suffered higher than expected defections of customers to rivals.
Mr Sixt insisted the 3 group would hit a revised target of ebitda breakeven by the middle of 2007, and said he expected 2006 losses before interest and tax, but after depreciation and amortisation, to be about half that of 2005.
“If we cut the loss by half this year, I think that is a pretty good indicator that the business is heading in the right direction.”