The Hindu Business Line : Why global cos are keen on Hutch Essar

No other acquisition in the Indian telecom space has managed to get so much interest as Hutchison Essar has. And one does not have to go too far to know the reason for at least three large telecom majors lining up to pick up Hutchison's Indian mobile operations.

As per the number available with the Cellular Operators Association of India (COAI), Hutchison Essar's ARPU (average revenue per user) is among the highest in the Indian industry at Rs 373, compared to Rs 348 for Bharti.

It also has the highest revenues per minute, beating rivals Bharti and Reliance Communications.

The minutes of usage per subscriber per month for Hutch are also higher compared to other operators.

No wonder that Vodafone, the world's second largest mobile company in terms of subscribers, is willing to bet nearly 10 per cent of its market capitalisation in acquiring Hutch Essar.

At $15 billion, which is what industry sources believe that Vodafone is willing to fork out to acquire 74 per cent stake in Hutch Essar, the British telecom company would pay about $682 for each of 22 million Hutch Essar subscribers.

In contrast, Cingular bought AT&T Wireless for $41 billion, acquiring 21.98 million subscribers at $1,891 a subscriber.

If Vodafone gets the deal, it will get a direct foothold into the largest growing market in the world at a lower price.

The company has had to face severe losses in the recent past and this may be its last chance to get into a rapidly growing market.

On the other hand, for Reliance Communications, acquiring Hutch Essar would fast-forward its plans to foray into the GSM cellular space.

The company is already the largest CDMA operator in the country with 25 million users and adding 20 million more subscribers would catapult it to the largest telecom operator in the country.

For Malaysia-based Maxis, Hutch Essar would give it a pan-Indian presence, which it has been looking to do ever since it acquired Chennai-based Aircel.

While Aircel has cellular services in the North-East and Tamil Nadu, Hutch Essar covers the other circles in the country.

Though Maxis has applied for fresh licences, it will have to wait for spectrum before it can roll out a network. Acquiring Hutch Essar would save the company a lot of time in investing in a new network.

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