Battle heats up for India's fourth mobile operator

Essar Group favourite to beat Vodafone in $20bn contest to control India's fourth largest mobile operator.

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By  Reuters Published  February 8, 2007

The Essar Group said on Thursday it had tied up funds to raise its stake in India's No. 4 mobile firm Hutchison Essar, a day ahead of a reported call for all bidders to submit offers in the $18-20 billion battle for the carrier.
Britain's Vodafone Group Plc., India's Reliance Communications Ltd. and family-run Indian business groups Essar and Hinduja are vying to grab a 67 percent stake in Hutchison Essar owned by Hutchison Telecommunications International Ltd.
The remaining stake in the carrier, which has 16 percent of India's mobile market, is controlled by the Essar group.
"We have already tied up the financing for the transaction with our consortium of banks," Prashant Ruia, an Essar Group director and son of the founder, told Reuters in an interview.
"We've been involved in the sector from day 1 and will remain involved," he said.
India's mobile market has 150 million customers and is the world's fastest growing, adding about 6 million users a month, with call rates as low as 1-2 U.S. cents a minute.
Ruia told Reuters the timetable for bids was up to Hutchison, while the Business Standard newspaper said bidders were expected to submit their offers by Friday and Hutchison had not fixed a base price for the stake.
On Wednesday, another paper said Hutchison Telecom may sell its stake through an open auction with a minimum reserve of about $14 billion "so as to eliminate bidders who are not serious".
Hutchison Telecom declined comment, but analysts said it appeared to want to get a preliminary set of offers in before the Lunar New Year starts in mid-February.
"At least some bids are likely before the Chinese New Year holidays, and a decision is likely by end-February or early March," said one telecoms analyst, who asked not to be named.
Separately, the Wall Street Journal reported the Hinduja group was teaming up to bid with Qatar Telecom.
Egypt's Orascom Telecom said last month it had not ruled out joining the fray, and Russian rival Altimo has also indicated an interest.
Spokesmen for Reliance Communications and the Hinduja group declined comment on Thursday.
Hutchison Telecom is controlled by Hong Kong's Hutchison Whampoa.
Vodafone and Reliance have completed due diligence of Hutch Essar. The Hinduja group began its due diligence on Monday.
Vodafone, Europe's biggest mobile phone group, is facing sluggish growth in Europe and has said it is keen to expand in developing markets, including Asia. It owns 10 percent of top Indian mobile firm Bharti Airtel Ltd.
Vodafone Chief Executive Arun Sarin visited India last month and has been reported as saying he would not "go overboard" with a bid for Hutchison Essar.
As a foreign company, Vodafone can only buy up to 74 percent of an Indian mobile operator. Sarin has been quoted as saying he was talking to several potential partners. The Ruias may also be natural partners.
Singapore Telecommunications Ltd., which owns 30.8 percent of Bharti, said on Thursday it was unsure if Vodafone's stake in Bharti was up for sale and that it was premature to comment on possible talks.
Anil Ambani, head of second-ranked Reliance Communications, has said he has the backing of several top global private equity funds.

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