Hutch Essar exposes Indian telecom M

New Delhi, Dec 29: Notwithstanding the result of the tussle to acquire Hutchison Essar, Indian mobile telecommunication market has ample room for more players to enter, through M&A route.

Some of the large mobile telecom service providers such as Telefonica SA of Spain, Germany's Deutsche Telekom AG and the French service provider France Telecom are among those missing out on the opportunities that exist in the Indian market, says Mr Rishi Sahai, Board Director of IndusView, the India-focused cross-border advisory firm.

The Indian mobile telecom market is growing at more than six million subscribers a month and expected to reach a mobile subscriber base of 348 million by 2010 from the current 143 million.

The acquisition of Hutchison Essar will be India's largest merger and acquisition (M&A) deal. With an expected bid of atleast 14 billion dollars for Hutchison Essar, the total value of M&A deals will touch 45 billion dollars.

The acquisition will also give the telecommunication sector top slot in the sectoral ranking of the M&A table with deal value of 16 billion dollars and a share of 36 per cent in the total deal value (45 billion dollars), said Mr Sahai.

If the acquisition of Hutchison Essar goes to Britain's Vodafone, it will be the largest cross-border deal involving an overseas firm acquiring a company in India.

Secondly, the acquisition will also swing the balance between inbound and outbound deals (involving Indian companies acquiring companies overseas) in favour of inbound deals at 18 billion dollars versus outbound at 16 billion dollars.

Infact, the deal value will be higher than the acquisition of UK's largest steel company Corus Group Plc, if it ends up with India's Tata Steel Ltd.

''However, going by the regulatory provisions, Vodafone will have to go with an Indian partner and its stake in the acquired company cannot exceed 74 per cent. Looking at the current stake holding of Hutchison Essar - 67 per cent owned by Hutchison Telecom International Ltd (HTIL), a subsidiary of Hong Kong based Hutchison Whampoa Ltd, and 33 per cent by domestic diversified Essar Group, the swing vote is in the hands of the latter, adds Mr Sahai.

Prior to the announcement of Vodafone's interest in Hutchison Essar, the telecom, oil and gas sector companies with M&A deal values of 2.3 billion dollars each jointly led M&A activity closely followed by the information technology and ITeS sector, which emerged as the third most consolidating industry in terms of value at two billion dollars.

In terms of volume, IT and ITeS continues to lead with 73 deals.

Hutchison Essar and Vodafone have kept the telecom sector quite active.

Earlier, Hutchison Telecommunications India Ltd (HT India), a subsidiary of Hong Kong based Hutchison Whampoa Ltd bought a controlling stake in Hutchison Essar Ltd (HEL) from India's diversified Essar Group. In October 2005, Vodafone, made its second entry in the country by taking 10 per cent stake in Bharti Tele-Ventures Limited (now renamed as Bharti Airtel Ltd) with an investment of 1.5 billion dollars.

Vodafone exit India in 2003 by selling out its stake in a regional mobile services operator RPG Cellular.

Other large mobile telecom deals this year included Aditya Birla Group's, one of the oldest and largest business houses of India, increase in stake in the mobile service, Idea Cellular; and Telekom Malaysia Berhad's, Malaysia's largest telecommunication company acquisition of significant stake in Spice Telecom, etc.

At 143 million mobile subscribers India is a part of the elite ''100 million mobile club'' along with the US, China, Russia and Japan. The fastest growing mobile phone market in the world, by percentage, is expected to grow at a compounded annual rate of 31 per cent over by 2010, according to research firm Gartner, Inc.

That compares with 11 per cent for China, whose 400 million subscribers make it the world's largest mobile phone market.

India's telecom growth story is particularly interesting as many of the big operators who earlier made an exit returned to its shores.

These include AT&T, the largest US telephone service provider, based in San Antonio, Texas; British Telecom Group, largest fixed line telecommunications provider in the United Kingdom and Vodafone Group, the world's largest mobile telecommunications company.

UNI