Hutch Okays Vodafone Deal
TMCnet Contributing Editor
It looks as though the long awaited deal of Hutchison Telecommunications International (News
) to sell its stake in India to Vodafone is finally reaching a climax. After months of negotiation and suspense, Hutch Telecommunications finally announced that it will sell its stake of 67 percent to Vodafone group for US $11.08 billion in cash. Although the deal was made much earlier, there were speculations among the industry watchers that Vodafone might back off from the deal if everything didn't go as planned..
Whatever the tension before, the result was surely expected, as the controlling shareholder of Hutchison Telecom conglomerate Hutchison Whampoa, had the power to vote. Hutchison Whampoa owns 49 percent of Hutch Telecommunications and the company had signed a deal back in February to sell its stake in the Indian company to Vodafone.
to the representatives of Hutch, shareholders were happy and willing to cast their votes in favor of the deal. What motivated many of the shareholders to sign for the deal was the presence of HK $6.75, a share which will be paid on the completion of the deal. On the completion of the deal, Hutchison Telecom expects to book an estimated pretax gain of US $9.6 billion. It would use HK $40 billion from the proceeds to invest in new and existing businesses and for general working capital. Another HK $13.9 billion will be used to pay down debt.
India is the fastest growing and one of the largest telecom markets in the world. With more than 80 percent Hutch Telecommunications’ business originating from this country, India was perceived to be Hutch’s premier business center. After this deal, Hutch will be left with scattered markets in countries like Israel, Indonesia, Thailand and Vietnam. Of course, it would have earned a phenomenal amount for selling its stake in its major business center.
On Thursday, there were reports in the media that Telecom Watchdog, an Indian non-governmental body, had filed a petition which alleged that the sale of its stake in Hutchison Essar would be in breach of India's regulation on foreign shareholding of the mobile company. But Hutchison Telecom was confident that the petition would have no impact on the completion of the transaction.
The petition filed by Telecom Watchdog sought to cancel the telecom license of Hutchison Essar. Although Telecom Watchdog made it clear that it didn’t want to block the sale of shares to Vodafone, it alleged that Hutch and Vodafone are violating laws governing foreign ownership of telecommunications companies. The Indian non-governmental body sought penalties for Hutch and Vodafone and demanded that the structure of the joint venture be altered to make it comply with regulations.
As predicted by Hutch Telecom, the petition does not seem to have any effect on the deal, at least for the moment.
Raju Shanbhag is a contributing editor for TMCnet. To see more of his articles, please visit his columnist page
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