Essar, Hutchison In Stake Swap Pact

The Ruias of the Essar group and the Hong Kong-based Hutchison Whampoa have reached a stake-swapping agreement, which will not entail any cash transactions.

The Ruias will acquire up to 40 per cent in all Hutchison ventures in India. And Hutchison will pick up 49 per cent in Essar's wholly-owned cellular arm, Aircell Digilink which operates in Uttar Pradesh (East), Rajasthan and Haryana.

Also, the Ruias will hold up to 30 per cent in Hutchison Max, the cellular operator in Mumbai. The Ruias are also expected to acquire stakes in other cellular ventures where Hutchison is in advanced stages of negotiation. For example, a 55 per cent stake in Usha Martin in Calcutta and a 30 per cent stake in Fascel in Gujarat.

 

"The alliance indicates a move by the Essar group to become a major player in the telecom business," sources said.

As part of its telecom strategy, the Essar group has decided to concentrate on the cellular segment, instead of dabbling in basic services. Recently, the group sold off 41 per cent stake in Essar Communications Ltd, the licence holder for basic services in Punjab, to Mahendra Nahata promoted-Himachal Futuristic Communications.

However, the Hutchison chief executive, Ashim Ghosh, and an Essar group spokesperson refused to comment on the issue, saying it was a confidential matter.

The two groups are also working out the details of setting up an umbrella company to handle the acquisitions. Last year, Hutchison had bought 49 per cent stake in Sterling cellular, the service provider in Delhi, where Essar holds the balance stake.

Once the alliance is in place, the circles will use the Orange brand, which has considerable status in international markets. Hutchison has already launched the brand in Mumbai and is slated to introduced it in Delhi shortly.

On an international public offering basis, the Delhi and Mumbai circles are valued by global investment banks at about Rs 5,000-6,000 crore, while the three circles controlled by the Ruias together with Fascel and Usha Martin are valued at about Rs 9,000 crore.

The Essar-Hutchison combine will have a subscriber base of over 4.55 lakh cellular phone users in the Delhi, Mumbai, Calcutta and Gujarat circles.

However, the figures for the three Aircell circles are not available.

Spreading orange

* Essar group to acquire up to 40 per cent in all Hutchison ventures in India

* Hutchison to pick up 49 per cent in Aircell Digilink

* Ruias to acquire up to 30 per cent in Hutchison Max in Mumbai

* Essar is also expected to pick up stakes in Usha Martin and Fascel

* The Essar-Hutchison alliance is expected to form a holding company to handle acquisitions

* Orange expected to be launched in all circles where the Essar-Hutchison combine operates

Subscriber numbers

Circle Operator Subscribers

Delhi Sterling Cellular 1,52,128

Mumbai Hutchison Max 1,48,580

Calcutta Usha Martin 42,673

Gujarat Fascel 1,11,665

Total 4,55,046