Rival Indian telecoms welcome Vodafone

Tuesday, February 13, 2007

Less than 24 hours after the announcement that Vodafone will buy a controlling stake in Hutchison Essar, rival mobile phone providers have welcomed the deal. Reliance Communications, which was outbid for the 67% share, said the Vodafone's win indicated the success and growth potential of India's mobile phone market.

Growth potential indeed! India's mobile phone market is one of the fastest growing markets in the world today, with more than 6.5 million new subscribers every month.

Sunday afternoon's announcement also saw Vodafone stocks shoot up in value, another indicator of the business world's acceptance and confidence in the 11.1 billion dollar deal.

"We congratulate Vodafone and welcome them to India," said Reliance's chief executive Anil Ambani.

Vodafone will pay $11.1 billion in cash for the acquisition, along with assuming $2 billion in debt, through its subsidiary Vodafone International Holdings. The deal is expected to close in the second quarter of this year, and is conditional to Indian regulatory approval.

Vodafone will offer to acquire the Essar Group’s 33% stake at the same price per share its offering Hutchison, the company said. Indian regulations however don't allow foreign operators to hold more than 74 percent of the equity in an Indian telecommunications service provider. If the Essar Group sells its stake, Hutchison’s local partners, which together have a 15 percent interest in Hutchison Essar, will increase their interest to 26 percent, Vodafone said.

Vodafone also offered Sunday to sell its stake of 5.6 percent in Bharti Airtel, also a large Indian mobile services operator, to another company of the Bharti Group for $1.6 billion, double the price for which it acquired the stake in 2005. It also announced a memorandum of understanding with Bharti Airtel for infrastructure sharing with Hutchison Essar.

Hutchison Essar is India's fourth largest mobile phone network.