Hutch on the block?

08 December 2006

Fed up of its differences with the Essar Group the Hong Kong-based Hutchison Whampoa may be planning of divesting its 52-per cent stake in Hutchison Essar. By Rex Mathew

Is Hutchison Essar, the third-largest GSM mobile operator in India after Bharti and BSNL, up for grabs? Hong Kong-based Hutchison Whampoa group, which holds a majority stake in Hutchison Essar, is reportedly planning to sell its stake.

Some of the largest private equity players based in the US are rumoured to be ready with bids for Hutchison Whampoa's stake in Hutchison Essar. Among Indian groups, Reliance ADAG — which owns Reliance Communications — is speculated to be keenly considering a bid.

While there is speculation that Hutchison group is exiting the telecom business completely, most telecom observers believe that only the stake in Hutch India is for sale. Hutchison Whampoa holds a 52-per cent stake in Hutchison Essar through Hutchison Telecommunications International (HTIL). The Essar Group is the other major shareholder, with a 33-per cent stake. Analjit Singh of Max India and Hutch India CEO Asim Ghosh also hold minority stakes.

Hutchison group is currently involved in a dispute with the Essar Group, over a 20-per cent stake sale in HTIL to Egyptian telecom company Orascom. The stake sale, which gives Orascom a 10 per cent beneficial stake in Hutchison Essar, was objected to by Essar, which raised the matter with the central government. There were reports that central intelligence agencies and the office of the National Security Advisor had objected to Orascom holding a beneficial stake, as it has telecom operations in Pakistan also.

There were differences between Hutchison and Essar over the merger of BPL Mobile with Hutch. The Essar Group acquired BPL Mobile and merged it with Hutch to raise its holdings in the latter to 33 per cent. There were reportedly some differences over valuations and over sorting out regulatory hurdles in the key Mumbai telecom circle.