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Hong Kong’s Hutchison Telecommunications International has asked bidders for its Indian mobile phone unit to submit offers by this weekend, setting the stage for a showdown in India’s largest corporate takeover battle.

The $17bn tussle for Hutchison Essar pits the UK’s Vodafone against rival bidders including Reliance Communications, India’s number-two mobile operator, the Hinduja Indian business family and the Essar Group, which owns a minority stake in Hutchison Essar.

The sale of India’s fourth-largest mobile operator has, for Vodafone, turned into a high stakes battle. It wants to grab a large foothold in the world’s fastest-growing big cellular market but does not want to risk shareholder wrath by overpaying.

With the takeover battle entering its third month, the bidder in the driver’s seat appears to be the Essar Group, which holds a 33 per cent stake.

Essar on Thursday said it had the funds in place to finance a purchase of the remaining stake. It says it has first refusal over Hutchison’s 67 per cent stake. Hutchison disputes this claim, which many analysts say applies only to other Indian mobile operators. There is concern that Essar could take the matter to court if the Hong Kong company tries to do a deal over its head.

Essar could also threaten to exercise blocking tactics, using its veto rights as a large minority shareholder over operational issues such as approval of the annual business plan or significant transactions.

People familiar with the situation said there was no information from Hutchison yet about how it planned to conduct the bidding process. The situation was “murky” because of uncertainty over Essar’s position, they said.

Essar is understood to be waiting for the rival bidders to submit their offers before making a move.

Reliance Communications faces the additional hurdle of needing to buy 100 per cent of the venture under Indian telecoms law, which prevents a company from running two mobile operations in the same region.

Egypt’s Orascom Telecom has not ruled out putting in a bid for Hutchison Essar, while Russia’s Altimo has also suggested that it might be interested.

People familiar with the issue say Essar’s plan might be to buy Hutchison’s stake and then spin off part of it through a subsequent sale to a strategic operator.

The Hutchison Essar sale comes as Dayanidhi Maran, India’s minister of information technology, said at a conference in Mumbai that the government expected to meet its target of doubling India’s telecoms subscriber base to 500m between the end of this year and 2010, largely through expansion into rural areas. The government will build 8,000 towers or base stations for joint use by private mobile operators.

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