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Our Bureau

Mumbai , Dec 19

Each of the suitors that has lined up to buy into or buy out GSM operator Hutchison-Essar has its own distinctive hurdle to overcome.

For a suitor who is an existing telecom player, such as Reliance Communications or Bharti Airtel, it would involve 100 per cent buyout as these companies already have operations in the telecom circles in which Hutch-Essar operates.

Indian regulations do not allow the same promoter to have more than 10 per cent stake in two operations in the same circle. They would have to do a complete buyout and merge the acquired company's operations with their existing ones in every circle.

Tough negotiations

A 100 per cent buyout necessarily means the persuading the Essar Group to sell. This might call for some rigorous negotiating skills for some of the Indian corporate suitors, according to analysts.

The Essar group holds 33 per cent stake in Hutch-Essar through Essar Teleholdings.

Bharti Airtel may additionally have other problems because it is already a GSM player and may exceed its spectrum limits if it acquires Hutch-Essar.

Also, with the Hutch-Essar enterprise valuations currently circulating in the market - varying between $12 billion and $15 billion - Bharti will probably not be interested and may find it cheaper to expand its existing operations, said analysts.

Essar Teleholdings could itself increase its stake in Hutch-Essar, but may find it difficult to raise the resources at current valuations, they added.

Other suitors

The other possible suitors, according to sources close to the talks (that are happening in various permutations and combinations), are Maxis Communications - already a stakeholder in Aircel that operates only in two circles but has licences for several circles; Egypt-based operator Orascom, which may have regulatory problems because it owns stakes in telecom companies in Pakistan and Bangladesh; and several private equity players who may have to join hands with others to buy into Hutch-Essar.

But these suitors can largely do without the co-operation of Essar, according to analysts.

Ever since it became evident that the Hong Kong-based Hutchison group, which controls 67 per cent stake directly and indirectly in Hutch-Essar, wanted to exit, there has been hectic speculation on who will net the company, the most high-profile of the suitors being Reliance, which has already announced its intention to move into GSM play.

Such an acquisition would allow it a speedy GSM entry, said analysts.

More Stories on : Telecommunications | Mergers & Acquisitions

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