Random Thoughts

Vodafone bags the Hutch Puppy

Vodafone has apparently struck a deal with Hutchison Telecom International (HTIL) to buy its 67% stake in its Indian operations for over USD 19 billion. This values the total Indian operations of the Hong Kong based telecom major at USD 826 per subscriber or INR 37,000. Now, that's a steeper price to pay looking at the valuation of INR 34,000 of Bharti Airtel, the largest mobile operator in India. Further, IDEA Cellular, which is tapping the primary markets to raise INR 1,250 crore values itself at approximately INR 19,000 per subscriber.

Amazing price tag for Hutch, isn't it? This perhaps shows Vodafone's desperation to enter the fastest growing mobile communication market in the world. The Indian market is expanding by 5-6 million users every month! And, despite this, market penetration is over 14%!! This is estimated to touch 28% by the end of this decade. That's mind numbing pace!! Perhaps this answers the obvious question of why such a steep pricing. But, there is another obvious question left unaddressed and unasked by the popular media: Why Hutch wants to move out of such a seemingly lucrative market after having over 16% stake?

Interestingly, nobody is in a mood to either ask or answer this question. Well, there is this vibe from down under the market currents. Hutch knows for sure that it has to make big investments in 3G business to remain competent. It has already spent over USD 20 billion in such projects. So, it needs more money to keep growing. But, why to sell the entire stake? It can very well offload some of its stake to the Indian public. That way, it can have its cake and eat it too. Now, comes the unscratched part of the story. It is rumoured that over a period of time, HTIL has routed investments in its Indian operations from various sources, some of which, it may not be comfortable to disclose to the Indian regulators. So, only way out for Hutch was to move out of India!

Well, that sets an inorganic growth tract for Vodafone in India. With the entry of world's largest mobile service provider in the country, the Indian telecom industry is up for a major excitement in the foreseeable future.

Labels: Corporations

posted by Ranjit @ 2/11/2007 10:26:00 pm