This marked the penetration of Vodafone into the Indian telecom market and provided the opportunity to Vodafone to tap the huge potential of expansion in India. To this end, Vodafone set up plans to launch services like mobile entertainment, mobile banking and low cost handsets. Vodafone acquired Hutchison Essar, the fourth largest telecom operator in India in Vodafone, the UK based mobile giant on the other hand is the highest revenue earning mobile service operator in the world. Out of the total bid of The deal was reached after months of negotiations between the two groups and after Vodafone had outbid other prospective companies.
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The deal meets strict acquisition criteria and is expectedly finding support from investors. It will give the company access to a ready India is expected to grow to million users by , currently adding million users a month. Now, it only needs to be seen whether the acquisition can be completed. According to Ruias, promoters of the Essar Group, their compliance is necessary as they hold the crucial right of first refusal.
They had earlier stated that they would exercise this right and would consequently match the highest bid at any price. However, for now, analysts are not sure about which way the tide will turn. We are at the moment evaluating all our options in the best interests of the group.
Essar owns 33 per cent of the company and we are delighted that Hutchison and Essar have together created this value. He has been with the company ever since its inception. Vodafone is keen to increase its presence in India as it is looking to garner at least a third of its profits from emerging markets by , compared to less than 20 per cent currently, claim company officials.
The HEL acquisition is expected to facilitate this. In the context of Indian telecom operators, analysts are of the opinion that the takeover will not bring any major change in either the valuation or the financials of companies like Bharti in which Vodafone had picked up 10 per cent stake in and Reliance Communications.
It will bring new products and 3G services at lower costs. The domestic market will have an international player with a lot of experience and good practices. Vodafone will, however, continue to hold an indirect 4. Welcoming Vodafone into the country, Sunil Bharti Mittal, chairman and managing director of Bharti, announced the recently signed memorandum of understanding for sharing infrastructure.
Vodafone also agreed to make Bharti its preferred vendor for long distance and leased line services, apart from promising nearly 50 per cent of its in-bound roaming traffic for three years. What remains to be seen now is, will Essar seal the deal? Telecommunication is a core business for the Essar Group. Vodafone has offered that we be their partner.
We are at the moment evaluating all our options in the best interest of the group. Today, the Indian telecom sector is one of the most sought after in the world and the bid is a strong endorsement of the government policy to promote the sector. Bharti and Vodafone have enjoyed a very fruitful partnership and both companies will work with the industry towards connecting millions of people across India.
Our bid also took into consideration the unique benefits of in-country consolidation and the substantial synergies that an existing player like Reliance alone enjoyed.
For consumers, it signifies tariff reduction due to increased competition and better experience as service quality is expected to improve with Vodafone bringing in best practices and services offered in its other operational markets. We are currently analysing the bids of all the players. On the face of it, the valuation seems to be slightly on the higher side. As far as Vodafone is concerned, it is currently into markets that are more or less saturated and with this deal it gets an opportunity to be in one of the fastest growing markets.
We thought that with Maxis and Telekom Malaysia acquiring a stake in Aircel and Spice respectively, the big deals were through. However, large deals are still coming through.
Since 3G is ready to roll out, the market looks quite challenging. Hutch is an asset for Vodafone as many European operators are looking for emerging markets. In the long term, the presence of an international major which has more revenues and more subscribers than all Indian telecom players combined is something of importance.
This will lend stability to the market. However, this is not something that Reliance will be happy about. However, it was not to be. It will bring new products and 3G services, as well as lower costs. Hutch was valued high as it has high ARPUs and a good management team.
It also has higher end subscribers. Vodafone offers 3G services, which will be adopted by higher-end users. The interest shown by Vodafone, which already holds a share in Bharti Airtel, is indicative of the fact that Vodafone is pleased with the profitability of its investment in India in order to consider acquiring a stake in a second Indian company. Also, foreign investment in any sector will add to the booming foreign reserves of the country.
Such actions are commonly voluntary and involve stock swap or cash payment to the target. An acquisition may be friendly or hostile Slide 4: Horizontal merger - Two companies that are in direct competition and share the same product lines and markets. Vertical merger - A customer and company or a supplier and company. Think of a cone supplier merging with an ice cream maker. Market-extension merger - Market- extension merger - Two companies that sell the same products in different markets.
Acquisition of Hutch by Vodafone
The Indian telecommunications industry is one of the fastest growing in the world. The industry has witnessed consistent growth during the last year on the back of rollout of newer circles by operators, successful auction of third -generation 3G and broadband wireless access BWA spectrum, network rollout in semi -rural areas and increased focus on the value added services VAS market. With this the overall tele -density telephones per peop le has touched The wireless subscriber base has increased to The GSM subscriber base stood at According to a report published by Gartner Inc in June , the total mobile services revenue in India is projected to grow at a compound annual growth rate CAGR of
Vodafone’s landmark acquisition of Hutch
Choose your FT trial. Vodafone completes Hutch acquisition HTIL also wanted to use the money earned through this deal to fund its businesses in Europe. This will alert our moderators to take action. The case will help the students to: To see your saved stories, click on link hightlighted in bold.