DoCoMo and Hutchison Essar, called off a deal to launch mobile Internet services in India using DoCoMo's technology due to U.K.-based operator Vodafone Group's bid for a controlling stake in Hutchison Essar, a major Indian operator.
NTT DoCoMo is Japan's dominant cellular provider but has seen profits fall as it competes with rivals in the saturated domestic market. While the financial hit from Monday's canceled deal will be small, it is symbolic of how the company has generally struggled to establish new sources of income.
DoCoMo's i-mode service includes technology that lets users send email and view online content via mobile phones. In December, the company and Hutchison Essar had agreed to launch the service in India this year. The company may now considering various other options in India, including tie-ups with other Indian carriers.
India is one of the world's fastest growing telecommunications markets, with about 206 million subscribers currently. Japan has more than 100 million users, but growth is largely stagnant.
Showing posts with label hutch deal. Show all posts
Showing posts with label hutch deal. Show all posts
Hutch Essar deal - Vodafone clears major hurdle
With Indian finance minister P Chidambaram giving his go-ahead, Vodafone seems to have cleared its last hurdle in acquiring a controlling stake in Hutch Essar. This approval comes within a week of the Foreign Investment Promotion Board giving its nod for the acquisition and should pave the way for Vodafone to secure management control of HEL and for the company to be renamed Vodafone Essar.
As per a leading finanacial daily " As a first step, Vodafone will now be able to constitute a new 12-member board to oversee the operations of the company. Essar vice-chairman Ravi Ruia will be the chairman of Vodafone Essar and Vodafone chairman Arun Sarin will be the vice-chairman. Max India chairman Analjit Singh and HEL MD Asim Ghosh will also be on the board."
The drama
The Vodafone-HEL regulatory saga, which saw the proposal being deferred thrice by FIPB, began in February soon after Vodafone announced it had agreed to acquire companies that controlled 67% in HEL from Hutchison Telecom for $11.1 billion. This had given rise to a controversy about whether the 15% held by Mr Singh, Mr Ghosh and IDFC should be counted as FDI. Besides, RBI and some government officials were reported to have initially opined that the 15% shareholding amounted to violation of FDI and Fema norms. However, the initial adverse views of some government departments were overruled by FIPB last week. This was after the law ministry, in its response to queries raised by the finance ministry, said Mr Singh and Mr Ghosh’s holdings did not amount to ‘benami’ transactions and were wholly Indian. Vodafone had also taken pains to clarify that it had directly acquired 52% in HEL along with options on stakes held by local partners which would give it what it described as ‘economic interests’ over the remaining 15%.
Curtain is yet to be closed...
What remains to be contended is a public interest litigation (PIL) filed by an NGO called Telecom Watchdog, which is pending in the Delhi High Court.
As per a leading finanacial daily " As a first step, Vodafone will now be able to constitute a new 12-member board to oversee the operations of the company. Essar vice-chairman Ravi Ruia will be the chairman of Vodafone Essar and Vodafone chairman Arun Sarin will be the vice-chairman. Max India chairman Analjit Singh and HEL MD Asim Ghosh will also be on the board."
The drama
The Vodafone-HEL regulatory saga, which saw the proposal being deferred thrice by FIPB, began in February soon after Vodafone announced it had agreed to acquire companies that controlled 67% in HEL from Hutchison Telecom for $11.1 billion. This had given rise to a controversy about whether the 15% held by Mr Singh, Mr Ghosh and IDFC should be counted as FDI. Besides, RBI and some government officials were reported to have initially opined that the 15% shareholding amounted to violation of FDI and Fema norms. However, the initial adverse views of some government departments were overruled by FIPB last week. This was after the law ministry, in its response to queries raised by the finance ministry, said Mr Singh and Mr Ghosh’s holdings did not amount to ‘benami’ transactions and were wholly Indian. Vodafone had also taken pains to clarify that it had directly acquired 52% in HEL along with options on stakes held by local partners which would give it what it described as ‘economic interests’ over the remaining 15%.
Curtain is yet to be closed...
What remains to be contended is a public interest litigation (PIL) filed by an NGO called Telecom Watchdog, which is pending in the Delhi High Court.
THE HUTCH DEAL - WHAT'S THE VODAFONE OFFER
THE COMPANY - Hutch Essar currently has some 23.3 million customers at 31 December 2006, representing a 16.4% national market share. Hutch Essar operates in 16 circles and has licences in an additional six circles. Up until January 2006, Hutch Essar had licences in 13 circles, of which nine have 900 MHz spectrum. In January 2006, Hutch Essar acquired BPL, thereby adding three circles, each operating with 900 MHz spectrum. In October 2006, Hutch Essar acquired Spacetel, adding six further licences, with operations planned to be launched during 2007.
THE DEAL - Vodafone is paying US$11.1 billion for a 67% interest in Hutch Essar, and will assume net debt of approximately US$2.0 billion. The transaction implies an enterprise value of US$18.8 billion for Hutch Essar. HTIL's existing partners, who between them hold a 15% interest in Hutch Essar, have agreed to retain their holdings and become partners with Vodafone. Vodafone's interest will be 52% following completion and Vodafone will exercise full operational control over the business. If Essar decides to accept Vodafone's offer, these local minority partners between them will increase their combined interest in Hutch Essar to 26%.
WHY ? - Constant pressure on Vodafone to enter emerging markets . In the context of a population penetration that is expected to exceed 40% by FY2012, Vodafone is targeting a 20-25% market share in India within the same timeframe. According to Vodafone, India is the fastest growing mobile market in the world, with around 6.5 million new subscribers every month.
BHARTI TO GAIN BY - Vodafone announced that it has signed a memorandum of understanding with Bharti Airtel on infrastructure sharing and that it has granted an option to a Bharti group company to buy its 5.6% direct interest in Bharti.
Whilst Hutch Essar and Bharti will continue to compete independently, Vodafone and Bharti have entered into a MOU relating to a comprehensive range of infrastructure sharing options in India between Hutch Essar and Bharti. Vodafone granted Bharti an option, subject to completion of the Hutch Essar acquisition, to buy its 5.6% listed direct interest in Bharti for US$1.6 billion which compares with the acquisition price of US$0.8 billion.
The Essar Group - currently holds a 33% interest in Hutch Essar and Vodafone will make an offer to buy this stake at the equivalent price per share it has agreed with Hutchison Telecom International.
Vodafone made no comment about whether the network would drop the Hutch branding, and become a Vodafone brand operator in India. The MOU outlines a process for achieving a more extensive level of site sharing and covers both new and existing sites. Around one third of Hutch Essar's current sites are already shared with other Indian mobile operators and Vodafone is planning that around two thirds of total sites will be shared in the longer term.
The plans for future - As part of the operational plan, Vodafone expects to increase capital investment, particularly in the first two to three years, with capex as a percentage of revenues reducing to the low teens by FY2012. The operational plan results in an FY2007-12 EBITDA CAGR percentage around the mid-30s. Cash tax rates of 11-14% for FY2008-12 are expected due to various tax incentives and will trend towards approximately 30-34% in the long term. As a result of this operational plan, the transaction meets Vodafone's stated financial investment criteria, with a ROIC exceeding the local risk adjusted cost of capital in the fifth year and an IRR of around 14%.
THE DEAL - Vodafone is paying US$11.1 billion for a 67% interest in Hutch Essar, and will assume net debt of approximately US$2.0 billion. The transaction implies an enterprise value of US$18.8 billion for Hutch Essar. HTIL's existing partners, who between them hold a 15% interest in Hutch Essar, have agreed to retain their holdings and become partners with Vodafone. Vodafone's interest will be 52% following completion and Vodafone will exercise full operational control over the business. If Essar decides to accept Vodafone's offer, these local minority partners between them will increase their combined interest in Hutch Essar to 26%.
WHY ? - Constant pressure on Vodafone to enter emerging markets . In the context of a population penetration that is expected to exceed 40% by FY2012, Vodafone is targeting a 20-25% market share in India within the same timeframe. According to Vodafone, India is the fastest growing mobile market in the world, with around 6.5 million new subscribers every month.
BHARTI TO GAIN BY - Vodafone announced that it has signed a memorandum of understanding with Bharti Airtel on infrastructure sharing and that it has granted an option to a Bharti group company to buy its 5.6% direct interest in Bharti.
Whilst Hutch Essar and Bharti will continue to compete independently, Vodafone and Bharti have entered into a MOU relating to a comprehensive range of infrastructure sharing options in India between Hutch Essar and Bharti. Vodafone granted Bharti an option, subject to completion of the Hutch Essar acquisition, to buy its 5.6% listed direct interest in Bharti for US$1.6 billion which compares with the acquisition price of US$0.8 billion.
The Essar Group - currently holds a 33% interest in Hutch Essar and Vodafone will make an offer to buy this stake at the equivalent price per share it has agreed with Hutchison Telecom International.
Vodafone made no comment about whether the network would drop the Hutch branding, and become a Vodafone brand operator in India. The MOU outlines a process for achieving a more extensive level of site sharing and covers both new and existing sites. Around one third of Hutch Essar's current sites are already shared with other Indian mobile operators and Vodafone is planning that around two thirds of total sites will be shared in the longer term.
The plans for future - As part of the operational plan, Vodafone expects to increase capital investment, particularly in the first two to three years, with capex as a percentage of revenues reducing to the low teens by FY2012. The operational plan results in an FY2007-12 EBITDA CAGR percentage around the mid-30s. Cash tax rates of 11-14% for FY2008-12 are expected due to various tax incentives and will trend towards approximately 30-34% in the long term. As a result of this operational plan, the transaction meets Vodafone's stated financial investment criteria, with a ROIC exceeding the local risk adjusted cost of capital in the fifth year and an IRR of around 14%.
Subscribe to:
Comments (Atom)