UK-based Vodafone is flush with cash. But, should it pay $ 21 billion to get a slice of India's booming mobile market?
One, it already has a 10% stake in Bharti Airtel. It could make a killing by selling off the stake it picked up for $ 1.5 billion (Rs 6,700 crore) in October 2005. Now it needs the approval of Bharti's Sunil Mittal before it acquires Hutchison Essar. That does not seem too difficult.
The real issue is can Arun Sarin justify the high price of the acquisition to picky Vodafone shareholders. Considering that Vodafone has just got out of the mess it went into after acquiring Germany's Mannesmann for $ 202 billion in 2000, that could be a rough call.
However, Vodafone officials are already doing the rounds of New Delhi's Sanchar Bhawan, home to the Department of Telecommunications.
Even if it does manage to acquire all of Hutchison Essar, it will have to dilute 26% of the equity to Indian shareholders. (India caps FDI in telecommunications at 76%). The other way round would be to align with Essar. That could be an issue in the not-too-distant future. Hutchison has had major problems with Essar.
How quickly will Vodafone move? That could be the decider.
1 comment:
Great time to begin a blog. You are the best person to start a blog on the Indian telecom sector. Here's hoping to see a lot of good stories and news breaks that one might not get to see in a newspaper or a magazine.
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