Just over a month after announcing success in the battle to but Hutchison's 67% stake in Indian cellular operator Hutchison Essar, the details of the deal appear to have been concluded. Vodafone will pay just over US$11bn for the stake held by HTIL, a listed subsidiary of Hutchison Whampoa. The remaining 33% will continue to be owned by Indian industrial conglomerate Essar.

Essar had controversially suggested that it had pre-emptive rights so far as HTIL's stake was concerned. This now appears to be a non-issue following Hutchison's agreement to pay more than US$400mn to forestall any legal challenge.

Essar has also secured the right to sell its holding to Vodafone after three years for a fixed price of US$5bn and a 'pit option' to dispose of up to US$5bn worth of shares in Vodafone Essar at a price to be independently adjudicated. Such deals would require a change in Indian rules on foreign ownership by this time.

"Essar has played a key role in transforming this business into a leading Indian mobile operator", said Arun Sarin, Chief Executive of Vodafone. "We look forward to leveraging this experience and working with our partner as the company enters its next phase of growth in the attractive Indian telecommunications market. We will be bringing the relevant range of Vodafone products and services to the Indian consumer."

Ravi Ruia, Vice Chairman of Essar, added: "Essar was a founding partner in Hutchison Essar and played an active role in building the company, including extending network coverage into several profitable regional markets.  By partnering with Vodafone we expect to create further value in the business.”

The new 'Vodafone Essar' will boast 25mn customers in India, which equates to a market share of more than 16%. Via acquisitions in 2006, it is poised to double its operational footprint compared with end-2005.

The key question surrounding this transaction is just why Hutchison, even taking its role as a serial investor in wireless into account, wanted out so badly and so quickly. US$10bn and some change may not quite explain it all.
Jim Chalmers