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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Please note:

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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Excerpts Contd...

The Slugfest

Before initiating the bidding process, Vodafone had to clear many regulatory issues.

Bharti Airtel, in which Vodafone had a 10% stake, asked its partner to make it clear whether Vodafone wanted to continue its relation with it.

Moreover, as GoI's telecom policy allowed only 74% of FDI into the sector, Vodafone's acquisition of a 67% stake in HEL would lead to the company crossing the limits of FDI allowed as both the players would be operating in the same circles...

The Aftermath

On March 22, 2007, Vodafone signed a shareholder agreement with its Indian partner, Essar, according to which Vodafone would hold a 52% and Essar would continue to hold a 33% stake. Some other minority shareholders, such as Asim Ghosh (Ghosh), Infrastructure development finance company (IDFC) and Analjit Singh together would continue to hold the remaining 15 per cent stake in the company...

Outlook

Vodafone planned to bring world class branding to India after the 'Hutch' brand was replaced by the Vodafone brand name. Vodafone wanted to build up its numbers in the Indian market mostly by expanding into the rural areas.

Vodafone also wanted to launch a 3G service in the Indian market as soon as the government declared the 3G policy. Rather than using the 3G services as a premium product targeted at upscale segment, Vodafone wanted to take 3G to the rural areas to provide hi-speed data services to the rural masses...

Exhibits

Exhibit I: Vodafone- Consolidated Profit and Loss Account (Preliminary)
Exhibit II: List of Cellular Service Providers in India
Exhibit III: Market Share of Mobile Operators by Subscribers in India

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