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Hutch Essar ?close to transaction?

Deal likely to be struck ?very, very fast?, say sources

NEW DELHI: The outcome of the battle for the fourth-largest mobile phone operator, Hutch Essar, is likely to be known very soon this new year, according to sources close to the development. ?Things are close to a transaction,? a source told DNA Money. He said, ?the deal will be struck very, very fast?.

If not, ?then there may not be any deal at all,? he added. The world?s largest mobile phone company Vodafone, which is expected to up its offer for Hutch Essar, is the front-runner, but not without competition.

One of the reasons why the battle for Hutchison Essar cannot be prolonged much is ?the way the telecom sector valuation is going?. Within weeks, the Hutchicon Essar?s valuation has risen from $12 billion to over $20 billion. In the end, the appetite of an operator will be the deciding factor, and not so much the backing extended by equity funds.

Although investment banking sources suggested that the valuation of Hutchison Essar is crossing ?rationality?, top-notch telecom players are trying to outbid each other in the race to acquire the asset that is up for sale. UK?s Vodafone, which is learnt to have valued 100% of Hutch Essar at $17 billion to $18 billion some time back, may shortly revise the valuation upwards, it is believed.

Hutchison Telecom International Ltd (HTIL), which holds 67% in Hutch Essar, had recently indicated that no offer less than $14 billion for its stake (that is, $20-21 billion for 100% of Hutch Essar) would be acceptable.

A report published in UK?s Guardian Unlimited on Sunday said, ?the bidding war for telecoms firm Hutchison Essar will erupt again, with Britain?s Vodafone preparing to table a fresh offer that would value the target at up to $19 billion.?

Even as Bharti group?s chairman and managing director Sunil Mittal has said that his company was not keen on buying Hutch Essar, industry sources refused to over-rule such a possibility.

?At a future date, a Vodafone-Mittal venture may run an entity, which could possibly be a merger between Hutch Essar and Bharti,? an industry insider argued.

Meanwhile, Essar, the joint venture partner of Hutch with 33% stake, is believed to be ?very serious about taking control of the telecom business?.

The group is learnt to have indicated a price of $11 billion for 67% that Hutch holds, thereby valuing the entire business at $16-17 billion. But conflict within the group over the various options that are before them right now is being seen as a big hurdle.

While Hutch had wanted to sell the Essar stake as a ?tag-along? to the potential buyer, there are differing views within the Essar group over the issue.

Malaysian telecom operator, Maxis, along with Texas Pacific, had put up a bid of $13.5 billion for the 67% stake of Hutch, much before any other player had.

Media reports claimed that the Maxis bid was rejected as it fell below the expectation of Hutch.

But a merchant banking source argued, ?it?s not just the Maxis bid alone that has been rejected, but also those of some other players. That?s why negotiations are still on.?

And yes, Maxis has not backed out yet from the race. Egypt?s Orascom, backed by Qatar Telecom, is there as well in the race, but repeated phone calls and email queries to both the companies went unanswered.

While the game is on, Anil Ambani?s Reliance Communications is playing its cards close to the chest.

The company, which has formally said that it sees great potential in acquiring Hutchison Essar, is yet to formally indicate any offer price. If it is able to strike the deal, it would be a good match for Reliance?s GSM growth ambitions.

But would India?s No 2 mobile company want to buy a No 4 at valuations as high as itself?

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