Orascom acquires indirect stake in Hutchison Essar
15 Jul 2006
Mumbai: The Foreign Investment Promotion Board (FIPB) has cleared 68 per cent foreign equity in the Ruia's joint venture cellular company Hutchison Essar. The overseas stake includes a 10 per cent indirect holding by the West Asia-based Orascom Telecom Holdings (OTH). Ruias hold 33 per cent stake in Hutchison Essar.
The FIPB clearance comes in the midst of a debate on the extent to which foreign equity may be allowed in telecom ventures. The debate also revolves round the issue of an indirect equity shareholding, arising mainly out of Orascom Telecom's (OTH) acquisition of 19.3 per cent stake in Hutchison in an earlier overseas deal which gives it an indirect stake of 10 per cent in Hutchison Essar.
OTH being a mobile player in Egypt, also with operations in Pakistan and Bangladesh, faced objections from National Security Council on the ground of security concerns.
Essar, however, said that Hutch hadn't informed the company while selling equity in Hutch to Orascom. Hutch defended its move saying that Orascom received the quotas and board seat from HTIL`s quota itself.
DoT had cleared the proposal on the ground that the deal is within the overall 74 per cent FDI ceiling and that the share transfer happened outside India. The department of economic affairs too cleared the deal.
Under the new FDI guidelines, it is mandatory for telecom operators to take government approval if they have foreign equity.
OTH, established in 1998, is a major player in the telecommunication market and is one of the largest and most diversified networks with operations in the Middle East, Africa and Pakistan. Orascom operates GSM networks in Algeria, Egypt, Pakistan, Iraq, Bangladesh, Tunisia and Zimbabwe and has reported a subscriber base of over 35 million as of March this year.
Orascom also reported an average telecom penetration rate of 11.5 per cent in mobile telephony across markets in the seven emerging markets in the Middle East, Africa and South Asia.
