Hutch Essar Takeover – Expensive Mistake ?

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In: Mobile, Telecom

The valuations for Hutch Essar have been highly unreasonable. Here is a list of developments.

  • Maxis backed by Texas pacific Group bid at $13.5 Billion
  • Relicance Communications Ltd backed by several financial institutions and VCs bids at $12 Billion for 100% stake. Subsequently raises the bid to $15- $17 Billion
  • Rumors of Essar – Orascom Telecom and Qatar Telecom joint bid surface
  • After talks with Ruia in London, Vodafone bids at $17 – $18 Billion for 100% stake.
  • Paparazzis and private investigators follow Ruia family flight schedules and find that Ravi Ruia is booked on a Hong Kong flight.
  • Ravi Ruia backed by Citibank and other FIs bids for 67% stake in Hutch for $11 Billion valuing Hutch at $16.5 Billion.
  • Macquaire Wireless report suggests Hutch’s valuation cannot be more than $13.79 while Morgan Stanley values the business at $11 Billion
  • Li Shing wants $14 Billion for his 67% stake
  • Minutes ago, it is reliably learnt that Anil Ambani is willing to match Vodafone’s bid.

OK. Telecom India has an analysis of the regulatory hurdles for Maxis, Reliance and Vodafone. Readers have commented that Arun Sarin’s move @ $18 Billion will be an expensive mistake and I agree 🙂

IMHO, I don’t think Ruias will ever sell their stake to Anil Ambani due to the corporate rivalry dating back to the days of Dhirubhai Ambani in Jamnagar which delayed Ruia’s dream of Essar Oil by more than 4 years. Vodafone has messed up its relation with Bharti Airtel Ltd and Sunil Mittal may collect a hefty sum to relieve Vodafone of Non-Compete clause and in all likelyhood will maintain the lead in GSM market. Orascom Telecom is likely to be kept out of the race on National Security grounds. Maxis winning the bid will make it even for all the players ?

Om Malik point’s out that Cingular bought AT&T wireless at $41 Billion with an ARPU / Month @ $55 while Hutch Essar’s ARPU is around $9. So who will commit this expensive mistake of buying Hutch or Hutch Essar at Insane Valuations ?

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