NEW DELHI – Reliance Communications said Thursday that it had secured financing to bid for Hutchison Essar, taking on Vodafone Group in a battle to create the biggest Indian mobile phone company.
“I’ve lost count of the number of private equity people that have lined up,” Reliance’s chairman, Anil Ambani, told reporters in Mumbai.
Reliance, which is based in Mumbai, and Blackstone Group, the U.S. private equity group, have asked banks led by Citigroup and UBS to lend almost $15 billion to finance a buyout of Hutchison Essar, bankers with direct knowledge of the deal said this month.
Together, Reliance and Hutchison Essar would have about 50 million subscribers, overtaking Bharti Airtel, which is based in India, now the world’s fastest- growing wireless market. A deal would give Reliance more users of the global system for mobile communications standard, the most-used cellular technology. Only 10 percent of Reliance’s customers use the GSM standard.
“Hutch will be a prize catch for Reliance, especially since it vaults Ambani to the top slot in the telecom game,” said R.K. Gupta at Credit Capital Asset Management in New Delhi. “You do not often see financiers queuing up at your door.”
Most of the world’s top 10 private equity firms have offered to team up with Reliance, Ambani said without identifying any. Banks are also supporting the bid, he said, adding that “financial institutions are ready to provide both debt and equity.”
ABN AMRO Holding, Barclays and Deutsche Bank are part of the group proposing to finance a purchase, according to the bankers with knowledge of the deal. They declined to be identified before an announcement.
Reliance will need money to fend off competition from Vodafone, the world’s largest mobile phone company, and Essar Group. Essar controls a 33 percent stake in Hutchison Essar, the fourth- largest wireless company in India.
Hutchison Whampoa, controlled by the Hong Kong billionaire Li Ka-shing, is the biggest shareholder in Hutchison Telecommunications International, which owns the rest of Hutchison Essar. A Hutchison Telecom spokeswoman did not return calls seeking comment.
Vodafone, based in England, said Friday that it might make an offer for a controlling stake in Hutchison Essar. The process is at an early stage and may not lead to a transaction, Vodafone said. A Vodafone spokesman, Mark Pursey, declined to comment Thursday on other bids for Hutchison Essar. The Financial Times reported Thursday that Vodafone had approached Hutchison Essar with an offer of $17 billion to $18 billion.
A Hutchison Whampoa spokesman, Jeremy Lau, speaking before Reliance’s announcement, said: “We have received different approaches, but there is no agreement at this point. At this stage, we have no new announcements to make.”
Essar has first right of refusal, or the right to be first offered the option of buying Hutchison Telecom’s stake in Hutchison Essar.
“Those are matters that really the current equity shareholders will really need to resolve before any third party, including Reliance, can consider anything,” said Ambani, the Reliance chairman.
Hutchison Telecom’s stake in the venture, which is limited by India’s rules on foreign control, includes 12.3 percent held on its behalf jointly by Asim Ghosh, managing director of Hutchison Essar, and Analjit Singh, chairman of Max India, a health care and insurance company.
The addition of subscribers in the eight months since April 1, at more than double last year’s pace, has increased the values of telecommunication operations in India, with shares of Reliance Communications and Bharti Airtel outperforming India’s benchmark stock index.
Shares of Reliance Communications rose 0.5 percent to close at 477.2 rupees, or $10.82, on the Bombay Stock Exchange before the announcement, valuing the cell-phone operator at $22 billion. Hutchison Whampoa gained 0.6 percent to 78.85 Hong Kong dollars, or $10.14, in Hong Kong. On Thursday, shares of Vodafone finished at 142 pence, down 1 pence.
A takeover of Hutchison Essar would raise Reliance Communications’ share of the Indian wireless market to more than 35 percent. The agreement would combine Ambani’s network, the largest CDMA-based operation in India, with Hutchison’s GSM service in 16 of India’s 23 telecommunication zones.
The combined company would also be the biggest operator in Mumbai and New Delhi, the two largest urban markets for wireless service in India.
Hutchison Essar, which began operations in 1994 with a cellular license for Mumbai, ended November with 22.3 million subscribers on a GSM network in 16 zones. The company’s one million new users last month gave it a market share of almost 16 percent.
India added a record 6.79 million mobile phone users in November, fueled by an economy that Credit Suisse has forecast would expand 10 percent next year, faster than that of China. India ended November with 143.02 million mobile phone connections, compared with 455 million in China.
“Reliance Communications, as part of its overall growth strategy, continuously examines several organic and inorganic opportunities for growth,” Ambani said. “Hutchison Essar is one such situation.”
Fuente: International Herald Tribune