Vodafone wins Hutch Essar auction with $ 11 bln bid

BARCELONA, Feb 12 (Reuters) Britain's Vodafone Group Plc beat rival suitors with a .1 billion agreed offer for a controlling stake in India's Hutchison Essar, gaining a strong foothold in the world's fastest growing mobile market.

Vodafone, a serial acquirer known for the most expensive acquisition in history, confirmed its deal for a 67 percent stake that valued India's fourth-largest mobile operator at .8 billion, including debt. It was Vodafone's third-biggest ever.

Earlier, a source close to the matter had told Reuters that Vodafone had won the auction with a bid that gave Hutch Essar an enterprise value of just under billion.

Vodafone, the world's biggest mobile operator outside China, said the Indian market, with just 150 million users in a population of 1.1 billion, offered strong growth potential and was in line with its strategy of seeking growth from emerging markets.

''India is the fastest growing major mobile market ...There is huge potential for growth in the future and penetration is only 13 percent,'' Chief Executive Arun Sarin told reporters.

The group's core European markets are saturated, and intense competition is eating into margins. India, by contrast, is expected to grow to 500 million subscribers by 2010 from 150 million now, adding 5 million to 6 million customers each month.

ONE OF FOUR Vodafone was one of four groups in the race to buy Hong Kong-based Hutchison Telecommunications International Ltd.'s stake in Hutchison Essar. Also bidding were India's Reliance Communications, and the Hinduja and Essar groups, the latter of which owns 33 percent of Hutchison Essar.

Vodafone said the deal met its strict acquisition criteria and would find support from investors.

The group has been accused in the past of overpaying for acquisitions, most recently its purchase of Turkish operator Telsim for .55 billion in December 2005. The latest deal is Vodafone's biggest since its record-breaking 180 billion-euro (1 billion) purchase of Germany's Mannesmann in 2000.

''We have got this at a very reasonable price and we're thrilled ... We are feeling very good in terms of talking to shareholders and the returns we will provide them,'' said Sarin, a U.S. citizen who was born in India.

Early reactions from analysts, some of whom had braced for bids as high as billion, were positive.

''That Vodafone has won Hutch Essar without a protracted bidding war and at a price below the top of the supposed range of around billion is positive,'' noted Dresdner Kleinwort analyst Robert Grindle.

The deal is a lucrative exit for Hong Kong billionaire Li Ka-shing, whose Hutchison Whampoa conglomerate ultimately controls the Indian operator through its majority holding in Hutchison Telecom.

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