Who will be Numero Uno in the Indian Telecom Market?
With Hutchinson-Essar deal making headlines all over, this deal possibly would be one of the biggest attempts towards consolidation conforming to the fact that there are immense opportunities in the Indian Telecom. With biggies like Reliance Communications, Bharti, Maxis from Malaysia and now Vodafone this deal has not only generated a lot of interest among analysts, industry observers, and stakeholders but also has led to various speculations about Telecom Market scenario in future.
And this is not all the list of potential bidders has risen to double digits with Singapore’s SingTel, South Africa’s MTN, Qatar’s Qtel, Norway’s Telenor and Egypt’s Orascom now seen as showing some interest. Others being named with some degree of caution include Telstra of Australia, Deutsche Telekom, France Telecom, Telefonica and NTT DoCoMo.
But Anil Ambani’s Reliance Communications is leaving no stone unturned as if it has become a question of self esteem and pride for him to clinch this deal. So to ensure that this deal is through in his favor he has used all his financial wizardry and pulled in all the biggies from banking world and private equity firms. This includes UBS, ABN Amro, Citibank and Chartered Bank as consortium of bankers and Blackstone and Texas Pacific as private equity firms.
The dealmakers are working on a package that will involve buying out both Hutchison and Essar. While the 67% Hutchison holdings could cost $9 billion, buying the Ruias’ sub-33% stake will cost another $ 4.5 billion, taking the total deal size to around $13.5-14 billion. With competition heating up Reliance Communication has revised the deal size to $ 15-17 billion. But Ruias’ still hold the key as they have to decide
whether it makes sense for them to sell their 33% stake in Hutch Essar along with Hutch’s 67% — which would leave them richer by about Rs 22-23,000 crore — or get into a potentially bruising battle for control of the company.
Another twist to tale is the aggressive interest shown by Vodafone of UK which can create obstacles for Reliance Communications plans. One school of thought believes that if Vodafone were to buy out Hutch's 67% abroad without touching Essar's stake (which they can easily do without violating the Govt. of India FDI policy for Telecom) it would rob the Ruias of some of their bargaining clout and force their hand.
The other school of thought believes that Vodafone is unlikely to buy out Hutch without carrying the Ruias with them since it would lead to a situation where it is not clear whether they will get management control.
Without a say in the day-to-day running of the company, Vodafone may not be interested.
What this deal would entail for Reliance Communications is multifaceted; the purchase of Hutchison Essar will give Anil Ambani an additional 17% market share (total of 45mn subscribers) in the Indian mobile telephony market. This will also augment the efforts for value added services market in India for Anil Ambani. With this deal going through Reliance communications can make a smooth transition from CDMA to GSM as in the current state Reliance ends up paying Qualcomm huge sums of money which anyway it wants to save.
Only time will tell who will emerge as the winner in this battle but for Reliance Communications the stakes are certainly very high……
With Hutchinson-Essar deal making headlines all over, this deal possibly would be one of the biggest attempts towards consolidation conforming to the fact that there are immense opportunities in the Indian Telecom. With biggies like Reliance Communications, Bharti, Maxis from Malaysia and now Vodafone this deal has not only generated a lot of interest among analysts, industry observers, and stakeholders but also has led to various speculations about Telecom Market scenario in future.
And this is not all the list of potential bidders has risen to double digits with Singapore’s SingTel, South Africa’s MTN, Qatar’s Qtel, Norway’s Telenor and Egypt’s Orascom now seen as showing some interest. Others being named with some degree of caution include Telstra of Australia, Deutsche Telekom, France Telecom, Telefonica and NTT DoCoMo.
But Anil Ambani’s Reliance Communications is leaving no stone unturned as if it has become a question of self esteem and pride for him to clinch this deal. So to ensure that this deal is through in his favor he has used all his financial wizardry and pulled in all the biggies from banking world and private equity firms. This includes UBS, ABN Amro, Citibank and Chartered Bank as consortium of bankers and Blackstone and Texas Pacific as private equity firms.
The dealmakers are working on a package that will involve buying out both Hutchison and Essar. While the 67% Hutchison holdings could cost $9 billion, buying the Ruias’ sub-33% stake will cost another $ 4.5 billion, taking the total deal size to around $13.5-14 billion. With competition heating up Reliance Communication has revised the deal size to $ 15-17 billion. But Ruias’ still hold the key as they have to decide
whether it makes sense for them to sell their 33% stake in Hutch Essar along with Hutch’s 67% — which would leave them richer by about Rs 22-23,000 crore — or get into a potentially bruising battle for control of the company.
Another twist to tale is the aggressive interest shown by Vodafone of UK which can create obstacles for Reliance Communications plans. One school of thought believes that if Vodafone were to buy out Hutch's 67% abroad without touching Essar's stake (which they can easily do without violating the Govt. of India FDI policy for Telecom) it would rob the Ruias of some of their bargaining clout and force their hand.
The other school of thought believes that Vodafone is unlikely to buy out Hutch without carrying the Ruias with them since it would lead to a situation where it is not clear whether they will get management control.
Without a say in the day-to-day running of the company, Vodafone may not be interested.
What this deal would entail for Reliance Communications is multifaceted; the purchase of Hutchison Essar will give Anil Ambani an additional 17% market share (total of 45mn subscribers) in the Indian mobile telephony market. This will also augment the efforts for value added services market in India for Anil Ambani. With this deal going through Reliance communications can make a smooth transition from CDMA to GSM as in the current state Reliance ends up paying Qualcomm huge sums of money which anyway it wants to save.
Only time will tell who will emerge as the winner in this battle but for Reliance Communications the stakes are certainly very high……
No comments:
Post a Comment