A bidding war appeared set to unfold in coming weeks as Vodafone prepared to make a formal offer to buy a leading Indian cell carrier, a potential acquisition that has drawn the attention of several other high-profile mobile phone companies and private equity firms.
The bid for Hong Kong-based Hutchison Whampoa's controlling stake in India's Hutchison Essar Ltd was important to Vodafone as it would help the British carrier gain a presence in one of the world's fastest growing markets: India is now adding 5 million new mobile phone connections every month, more than China.
For now, Vodafone's biggest competition for the prize is Reliance Communications Ltd, India's second-largest mobile phone company, which would become the market leader if its plans to acquire Hutchison Essar, which is unlisted, came through.
Vodafone's move was also strategic for its chief executive, Arun Sarin, who has come under fire from shareholders for lackluster share prices and criticism that the world's largest mobile phone company lacked a credible strategy for further growth.
A week after the company made its interest public, Sarin -- whose family's roots are in India -- flew to New Delhi to hold talks with top government officials and potential partners.
Winning the confidence of government officials is crucial to such deals in India, where ministers and politicians have a reputation of meddling in merger and acquisitions, especially when foreign companies are involved.
"When it happens, it will be a large transaction. We would like it to be smooth," Sarin told reporters after a meeting last week with Indian Finance Minister P. Chidambaram.
Vodafone emerged as a front runner earlier this month after making an approach that reportedly valued all of Hutchison Essar at between US$17 billion and US$18 billion, which would make it the biggest-ever corporate takeover in Indian history.
Sarin said his company was planning to make a formal takeover offer early next month.
A bidding war appeared inevitable, however.
Hours after Sarin's meetings with Indian officials last Wednesday, the board of Reliance Communications authorized its chairman, Anil Ambani, to raise funds and "take all necessary steps" to counter Vodafone.
A day later, Ambani, one of India's most influential businessmen, met most of the officials who had held talks earlier with Sarin.
Reliance Communications' current market share is close to 20 percent and most of its phones are based on CDMA technology. The company wants to scale up its cellular phone services based on GSM -- the other dominant technology -- which is what Hutchison-Essar offers to nearly 20 million customers.
Media reports have said that Reliance Communications could come with a bid that values all of Hutchison Essar at about US$20 billion.
"They are going to do what it takes to get it," said Romil Shetty, a telecommunications analyst with the consulting firm KPMG.
"At the moment, it seems to be Vodafone [versus] Reliance, but there are some more companies that might get into the fray later," Shetty said.
Among other interested parties were Malaysia's Maxis Communications Bhd and the Hinduja brothers -- Britain-based Indian businessmen who previously held a stake in Hutchison Essar.
Media reports have said several high profile private equity firms, including US-based Texas Pacific Group and Blackstone Group, have also been exploring tie-ups with possible bidders.
Besides rival bidders, Vodafone must be ready to wade through complex Indian rules and regulations, including a 74 percent cap on foreign investment in telecom ventures.
In the case of Hutchison Essar, the story was even more complicated because of the number of stakeholders involved.
Hong Kong-based Hutchison Whampoa holds 52 percent stake in the company, while its India-based associates hold 15 percent. Hutchison Whampoa wants to sell out and its associates have said they are ready to tag along.
India's Essar Group holds the remaining 33 percent and it wasn't clear if it would like to sell its stake or join up with the company that buys Hutchison Whampoa's stake.
Some media reports have said Essar believed it had the first right to buy Hutchison's shares in the joint venture and that the company would try to make most out of the situation, either by buying out Hutchison's stake or getting a good price to sell out completely.
Shetty believes Essar is ready to get a good price and get out. "I don't think they are serious about staying in the telecom business," he said.
SECURITY: As China is ‘reshaping’ Hong Kong’s population, Taiwan must raise the eligibility threshold for applications from Hong Kongers, Chiu Chui-cheng said When Hong Kong and Macau citizens apply for residency in Taiwan, it would be under a new category that includes a “national security observation period,” Mainland Affairs Council (MAC) Minister Chiu Chui-cheng (邱垂正) said yesterday. President William Lai (賴清德) on March 13 announced 17 strategies to counter China’s aggression toward Taiwan, including incorporating national security considerations into the review process for residency applications from Hong Kong and Macau citizens. The situation in Hong Kong is constantly changing, Chiu said to media yesterday on the sidelines of the Taipei Technology Run hosted by the Taipei Neihu Technology Park Development Association. With
CARROT AND STICK: While unrelenting in its military threats, China attracted nearly 40,000 Taiwanese to over 400 business events last year Nearly 40,000 Taiwanese last year joined industry events in China, such as conferences and trade fairs, supported by the Chinese government, a study showed yesterday, as Beijing ramps up a charm offensive toward Taipei alongside military pressure. China has long taken a carrot-and-stick approach to Taiwan, threatening it with the prospect of military action while reaching out to those it believes are amenable to Beijing’s point of view. Taiwanese security officials are wary of what they see as Beijing’s influence campaigns to sway public opinion after Taipei and Beijing gradually resumed travel links halted by the COVID-19 pandemic, but the scale of
TRADE: A mandatory declaration of origin for manufactured goods bound for the US is to take effect on May 7 to block China from exploiting Taiwan’s trade channels All products manufactured in Taiwan and exported to the US must include a signed declaration of origin starting on May 7, the Bureau of Foreign Trade announced yesterday. US President Donald Trump on April 2 imposed a 32 percent tariff on imports from Taiwan, but one week later announced a 90-day pause on its implementation. However, a universal 10 percent tariff was immediately applied to most imports from around the world. On April 12, the Trump administration further exempted computers, smartphones and semiconductors from the new tariffs. In response, President William Lai’s (賴清德) administration has introduced a series of countermeasures to support affected
Pope Francis is be laid to rest on Saturday after lying in state for three days in St Peter’s Basilica, where the faithful are expected to flock to pay their respects to history’s first Latin American pontiff. The cardinals met yesterday in the Vatican’s synod hall to chart the next steps before a conclave begins to choose Francis’ successor, as condolences poured in from around the world. According to current norms, the conclave must begin between May 5 and 10. The cardinals set the funeral for Saturday at 10am in St Peter’s Square, to be celebrated by the dean of the College
RSS