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Saturday, May 05, 2007
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Telecommunications Info-Tech - Foreign Direct Investment Government - Policy Vodafone-Hutch deal gets Finance Minister's nod Our Bureau
Plans ahead The company has lined up a $2-billion investment over the next two years. Vodafone may bring its low-cost handset in the second half of 2007.
New Delhi May 4 Vodafone has cleared the last official milestone to enter the booming Indian mobile market with the Union Finance Minister, Mr P. Chidambaram, giving his approval to the deal to buy out Hutchison Telecom International Ltd's stake in Hutchison Essar. Earlier the Foreign Investment Promotion Board (FIPB) gave its nod to the proposal after months of deliberation on whether the company was violating the foreign direct investment norms. Vodafone had proposed to acquire a majority stake of 52 per cent in Hutchison Essar for $11.1 billion. While the Finance Minister's approval puts to rest all doubts over the acquisition and paves the way for Vodafone to roll out its India strategy, there could be one more hurdle to cross before the British telecom major can launch its brand in the fastest growing mobile market in the world. Consumer group Telecom Watchdog had filed an appeal against the deal in the Delhi High Court, which is still pending a decision. Mr Anil Kumar, Secretary of Telecom Watchdog, said that he would approach the court questioning the Government decision to clear the proposal from Vodafone. The court on March 9 had directed the FIPB to investigate the allegations of FDI norm violation within two months. In February, Vodafone had announced its acquisition of controlling stake in Hutch-Essar from the Hong Kong-based Hutchison International. India's Essar Group of the Ruias had 33 per cent stake in it of which, 22 per cent was through a Mauritius-based investment company. The Managing Director of Hutch-Essar, Mr Asim Ghosh; the Max India Chairman, Mr Analjit Singh, and IDFC, owns the remaining equity of 15 per cent. The FIPB had given a conditional approval that the equity held by the Indian individuals cannot be sold to a foreign entity without the Government's approval.
Notification awaited
While Vodafone officials said that they would comment on their India plans only after getting a formal notification of the approval, sources said that the company has lined up a $2-billion investment over the next two years. The company is geared up to accelerate this investment over the next few years spending as much as 50 per cent of Vodafone Essar's revenues on capital expenditure, according to sources close to the company.
Low-cost handsets
Apart from taking its network to the rural areas of the country, Vodafone is also bringing its low-cost handset in the second half of 2007. The company had recently announced an agreement with the Chinese handset manufacturer ZTE, whereby, a range of Vodafone-branded, ultra low-cost handsets would be introduced across Vodafone's global markets including India. While the company plans to introduce the Vodafone brand in place of the Hutch brand, it will undertake consumer research to ensure that the change is done in a systematic way. The company is also planning to roll out services in six new circles by the end of this year. Initially the company will offer service under the Vodafone Hutch brand. It was earlier decided that the Essar Group Vice-Chairman, Mr Ravi Ruia, would be the Chairman of the new joint venture called Vodafone Essar, while Vodafone's Chief Executive, Mr Arun Sarin, will be the Vice-Chairman. Mr Asim Ghosh will continue to be the Chief Executive Officer of the cellular company responsible for day-to-day operations. Vodafone is expected to begin its India operations by next quarter.
Related Stories: More Stories on : Telecommunications | Foreign Direct Investment | Policy
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