The Hutchison Essar Acquisition: Vodafone's Foray into an Emerging Market

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Case Details:

Case Code : BSTR275
Case Length : 15 pages
Period : 2006-2007
Pub Date : 2008
Teaching Note : Available
Organization : Vodafone Plc.
Countries : India, UK

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"With limited growth prospects in Vodafone's core European markets, Sarin's No. 1 job right now is to convince investors that he has a viable long term growth strategy. And gaining control of a fast-growing operator in India is the best opportunity he has to do it."¹

-John Delaney, principal analyst at Ovum,² in January 2007.

"The announcement is a clear evidence of how we are executing our strategy of developing our presence in the emerging markets. Hutch Essar is an impressive, well-run company that will fit well into the Vodafone Group."³

-Arun Sarin, CEO, Vodafone Ltd., in February 2007.

"We exit the Indian market as one of the best capitalized telecom companies in the region which will enable us to react swiftly to new opportunities and to accelerate growth in our existing markets."⁴

-Canning Fok, Chairman, Hutchison Telecom International Limited, in May 2007.

Vodafone's Foray into India

On February 11, 2007, the Vodafone Group Plc (Vodafone), a UK-based telecom company, declared that it had finally bagged the fourth largest Indian mobile operator, Hutchison Essar Ltd. (HEL). This announcement ended an acquisition battle - probably the most ferociously fought - in the Indian telecom sector. Vodafone bought a 52% stake in HEL for US$11.1 billion from Hutchison Telecom International Ltd. (HTIL)⁵; 33% stake was still held by the Essar Group (Essar)⁶. The company was valued at US$19.3 billion. Vodafone won the battle against other major competitors in the fray like Reliance Communications Ventures Ltd.⁷ (Reliance), Essar and the Hinduja group.⁸

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1] Kerry Capell, "Why an India Deal is Vital to Vodafone," www.businessweek.com, January 16, 2007.
2] Ovum is a telecom consultancy firm based in London, UK.
3] Heather Timmons, "Vodafone Wins Control of Hutchison Essar of India," www.iht.com, February 11, 2007.
4] "Vodafone Pays Less for Hutch Deal," www.telegraphindia.com, May 10, 2007.
5] HTIL was the telecom business wing of the Hong Kong-based conglomerate, Hutchison Whampoa, which had interests in Operating of ports, Retail, Property development, and Communications.
6] Essar was an Indian based conglomerate with interests in Steel, Energy, Power, Communications, Shipping and Construction.
7] Reliance Communications Ventures Ltd is the telecom arm of the Anil Dhirubhai Ambani Group with interests in Energy, Communications, Entertainment and Telecom.
8] The Hinduja group was a diversified business group based in UK with interests in Banking, Finance and the Auto industry.