Vodafone shells out $11.1B for Indian carrier

International operator Vodafone Group plc has agreed to acquire a majority interest in Indian mobile operator Hutchison Essar Ltd. for $11.1 billion.
Vodafone will acquire companies that control a 67-percent interest in Hutch Essar via company subsidiary Vodafone International Holdings B.V. Vodafone said that it would buy out the Essar Group’s 33-percent interest in the wireless carrier, and that arrangements with other minority holders would result in a post-acquisition shareholder structure that meets India’s requirements for foreign ownership.
Vodafone also said that it has set up a memorandum of understanding with another Indian operator, Bharti Airtel Ltd., for “a comprehensive range of infrastructure-sharing options in India” for Hutch Essar. Vodafone has a 10-percent direct interest in Bharti, but has agreed to allow another Bharti group company to buy 5.6 percent of that interest for $1.6 billion.
Hutch Essar and Bharti will “continue to compete independently,” Vodafone said, but the infrastructure-sharing agreement is “expected to reduce the total cost of delivering telecommunication services, especially in rural areas, enabling both parties to expand network coverage more quickly and to offer more affordable services to a broader base of the Indian population.”
Vodafone indicated that it would benefit from the acquisition by scoring a controlling position in a leading operator in the fast-growing Indian mobile market. Hutch Essar counted 23.3 million customers at the end of 2006, or about 16.4 percent of the national market share. Meanwhile, the infrastructure sharing would substantially reduce network operating and capital expenditures, Vodafone said.
“India is destined to become one of the largest and most important mobile markets in the world and this acquisition will enable our shareholders to benefit from our increased investment in this market,” said Sir John Bond, Vodafone’s chairman.