The Swayamvar of Hutch

Posted on | December 20, 2006 |

Hong Kong based Hutchison Telecommunications International (HTIL) is conducting a Swayamvar of its Indian subsidiary Hutch-Essar (HEL). And all the big and small maharajas of Indian telecom are lining up.

Buying and selling businesses is not alien to Hutchison Whampoa, headed by billionaire Li Ka Shing. The group sells a business as and when it gets good value.

there are multiple reasons supporting a possible sale: Telecom valuations are currently high (with HEL being valued at nearly $14 billion), the group needs money to repay debts and Hutchison Telecommunications International (HTIL), which holds 67% in HEL, has failed to take public its Indian arm.

Hutch Essar is understood to be valued between $13-17 billion. Research firm Macquarie puts Hutch’s enterprise value (EV) at $13.8 billion while ET estimates the value to be around $15-17 billion.

The Indian telecom market is the fastest growing in the world and pre-tax profits for the top three or four telcos are said to be in the region of 40%.

List of would-be suitors is growing by the day - from Reliance Communications to Essar Group to Maxis of Malaysia, besides Orascom, Qatar Telecom, Vodafone and perhaps Bharti Airtel.

Reliance Communications is believed to have tied up with four American equity funders — Blackstone, Texas Pacific Group, KKR and Carlyle. For Reliance it makes sense to acquire Hutch Essar. Reliance Communications has a subscriber base of about 24 million, second only to Bharti Airtel’s 30 million and a shade larger than Hutch Essar’s 22 million. Reliance’s acquisition of Hutch Essar would propel him to a dominant numero uno position.

But it isn’t enough for Hutchison to agree to Reliance’s offer to buy its 67% even though it would give him majority control of Hutch Essar. Under law, it’s all or almost nothing: he has to stay below 10% or he has to buy out the entire 100%. Therefore, unless Essar’s Ruias agree to sell their 33% and exit Hutch Essar, Reliance cannot enter. But regulatory guidelines do not pose hurdles in the way of Reliance acquiring Hutch.

As per the guidelines, the combined entity can’t hold more than 15 MHz of spectrum in Metro and A category circles and 12.4 MHz spectrum in B & C circles. RCL faces the spectrum regulatory issues only in two circles.

RCL’s GSM arm, Reliance Telecom, offers services in eight circles, of which it overlaps with HEL in West Bengal and Kolkata. HEL is not present in RCL’s other GSM circles

Category: Reliance

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One Response to “The Swayamvar of Hutch”

1. Wireless Federation / News
   December 21st, 2006 @ 5:12 pm

   [...] less than a month. Lets see who will be the charming prince to get the varmala. Source- [...]

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