Hutchison Essar bids due, deal weeks away -sources

HONG KONG/LONDON, Feb 9 (Reuters) The multi-billion-dollar bid battle for Indian mobile operator Hutchison Essar moved up a level on Friday, with potential suitors set to submit bids, but a deal may still be weeks away, two sources with knowledge of the bidding said.

One source said potential suitors for Hong Kong-based Hutchison Telecom International's 67-percent stake in the Indian operator were likely to put in their bids on Friday, but the timing of any sale was difficult to predict.

Media reports from India have suggested that the deadline for the submission of bids, expected to value the Indian operator as high as billion, was midnight on Friday, with Hutchison set to discuss the bids on Sunday.

However, another source said it was unlikely a deal would be ''wrapped up in the next week or two''.

''It is still going to extend into March. I wouldn't get too excited about things being concluded very quickly. There may be bits and pieces going on in between. I don't think there's going to be any official decision for some time yet,'' the source said.

Hutchison's Indian partner, the Essar group, as well as UK-based giant Vodafone Group Plc, No. 2 Indian carrier Reliance Communications and the Hinduja group are all in the race for India's fourth-largest mobile firm.

A fifth contender, potentially the Altimo telecoms arm of Russia's Alfa Group, may also join the fray, Indian news channel CNBC-TV 18 reported on Friday, citing unnamed sources.

A deal would be the latest in a long list of lucrative exits for Hong Kong billionaire Li Ka-shing, whose Hutchison Whampoa conglomerate ultimately controls the Indian operator.

Li Ka-shing, Asia's richest man and the Chairman of Hutchison Whampoa, is famed for his market timing, having sold mobile group Orange to Germany's Mannesmann during the telecoms boom in 1999 for a billion profit.

''It's time to conclude the deal,'' said Frederick Tsang, research director at China Everbright Ltd. in Hong Kong.

''There shouldn't be too many obstacles to slow down the deal.

Some people think the ending will be anticlimactic, and there will be selling pressure on Hutch Telecom,'' he said.

But whatever happens, the 78-year-old Li is in a strong position: He can cash out at what analysts say is a rich price, or he can continue to build up the business in a fast-growing cellular market.

''They don't need to sell,'' said Credit Suisse analyst Cusson Leung.

Shares in Hutchison Telecom, which also has operations in Hong Kong, Thailand and elsewhere, have rallied 28 percent since the start of November on buyout interest in the Indian business, which is its biggest asset. The stock rose 0.63 percent to close at HK.20 on Friday.

Hutchison Telecom, which is being represented by Li's house bankers, Goldman Sachs, declined comment on the potential sale of its India business on Friday.

ESSAR PRESSURE The Essar group told Reuters on Thursday that it has lined up funding for a bid to lift its 33 percent stake in the carrier. Its financial backers include Citigroup.

Essar has said it enjoys the right of first refusal in any buyout of Hutchison Telecom's stake, while Hutchison believes that right only applies in the event that the buyer is one of three local rivals, including Reliance, a source has said.

Essar will ''wait and watch'' until the initial bids are submitted, India's Hindustan Times newspaper reported on Friday.

Vodafone, Europe's biggest mobile group, is eager for growth beyond its saturated home market, but has vowed not to overpay in the Hutchison Essar sweepstakes. As a foreign firm, it can own only up to 74 percent of a local carrier.

Reliance would leapfrog Bharti Airtel to become India's biggest carrier if its bid was successful. It has lined up financing from banks including ABN AMRO, JPMorgan and Deutsche Bank, among others.

''The strategic value of Hutch would be most significant to Vodafone and RCL (Reliance), both frontrunners in the race for Hutch,'' Fitch Ratings said in a note.

The Hinduja group, meanwhile, has teamed up with Qatar Telecom for its bid, the Wall Street Journal reported this week. The group, which is still conducting due diligence, has asked for an extension of the deadline, India's Economic Times newspaper said on Friday.

REUTERS SBA GC1816