Govt puts Hutch bid for Aircel on hold

Rs 1,600 cr deal to buy Tamil Nadu cell operator may be off.

Hutchison-Essar's deal to buy out the C Sivasankaran-promoted Aircel Ltd, which operates mobile cellular services in Tamil Nadu and Chennai, has hit a roadblock with the government yet to clear the deal. The memorandum of understanding between the two companies expires in the first week of November.

Aircel executives refused to comment on the issue, while Hutch executives were unavailable for comments. Sources close to the deal said Aircel will now have to look again for a buyer for the two circles.

Hutchison had agreed to pay around $362 million (Rs 1,600 crore) for Aircel. If the deal had gone through, it would been one of the largest telecom deals in the country. Hutch-Essar had agreed to pay just over Rs 18,000 per subscriber to acquire the company, which has 850,000 subscribers.

The Hutch-Essar combine had pipped both Idea Cellular and Bharti Televentures which were also in the race for buying out the company. Bharti had offered Rs 1,200 crore but that was not acceptable to Sivasankaran.

The price offered by Hutch per subscriber for Aircel was higher than what Bharti forked out for acquiring the Shyam group's Hexacom Ltd, which runs mobile services in Rajasthan. Bharti paid Rs 300 crore to pick up a 68 per cent stake in the company with an acquisition cost of over Rs 10,500 per subscriber.

In another deal some months ago, Idea Cellular is believed to have forked out Rs 1,150 crore (including debt) to buy out Escotel Mobile which operates in Haryana, Kerala and Uttar Pradesh (west) with a subscriber base of over 1 million. The acquisition cost per subscriber came to over Rs 11,000.

Sivasankaran apparently has charted out an ambitious growth plan which includes a re-entry into the GSM cellular business, but this time directed only at rural markets.

He has also submitted a proposal to launch evolution data only (EVDO), a CDMA-based technology, which offers data speeds which are five-10 times faster than GPRS phones. Sivasankaran has also forayed into food with his acquisition of Amit Judge's stake in the coffee chain, Barista.

It's a deal undone

• Hutch-Essar had pipped both Idea Cellular and Bharti Tele-Ventures. Bharti had offered Rs 1,200 crore but that was not acceptable to Sivasankaran
  
• Hutch-Essar had agreed to pay just over Rs 18,000 per subscriber to acquire the company, which has 850,000 subscribers
  
• Now Aircel will have to find a new suitor, say sources