Ppt Voda Hutch

A Business Valuation report on 

TELECOM INDUSTRY MERGERS AND ACQUISITIONS

VODAFONE AND HUTCH ESSAR CASE STUDY

Growth Strategies

OrganicInorganic

Mergers and Acquisitions

Motives Behind M&AEconomies of ScaleIncreased revenue / Market ShareCross sellingCorporate SynergyTaxesGeographical or other diversification

Types of MergersHorizontalVerticalConglomerate

Vodafone - BackgroundSubsidiary of Racal Electronics in 1984Demerged from Racal Electronics Plc. and became and

independent company in September 1991. Changed its name to Vodafone Group

Headquarter in Newbury, Berkshire, EnglandOperations in 25 countries and partner networks in a further

42 countriesVodafone Essar is owned by Vodafone 52%, Essar Group

33%, and other Indian nationals, 15%On February 11, 2007, Vodafone agreed to acquire the

controlling interest of 67% held by Li Ka Shing Holdings in Hutch-Essar for US$11.1 billion

The whole company was valued at USD 18.8 billion

Hutchison Essar Hutchison Whampoa and its Indian business

partner – Max Group, established Hutchison Max in 1992

In 1994, Hutchison Max acquired a majority stake in Essar Group and entered Delhi, UP, Haryana and Gujarat.

Till 2005, Hutchison had 13 license which increased to 16 after the acquisition of BPL Mobile

In 2006, it acquired Essar Spacetel — A subsidiary of Essar Group, adding six further license

Highest market share and generate a higher Average Revenue Per User (ARPU) than its competitors

The Takeover

Vodafone(A foreign company)

HTIL (Whompoa group of La-KA

Shing, Hong Kong

HUTCHISON ESSAR

(Indian Company)

12% Minority

ESSAR GROUP

67%

Takes over

Why takeoverVodafoneWanted to expand into the Asian market. India was

2nd largest market for mobile.

HutchisonMutual DistrustSaturation of urban market. Expansion in rural

market would lead to falling average revenue per user(ARPU)

Best time to quit Indian operation to finance other operation. HTIL wanted to use the money earned through this deal to fund its business in Europe

Principle Benefits

Attractive and fast growing Indian mobile marketHutch Essar delivers a strong existing platform in

India (22 out of 23 license areas , YoY revenue growth of 51% and an EBITDA margin of 33% in the six months to 30 June 2006 )

Infrastructure sharing with Bharti to reduce the total cost of delivering telecommunication services

Accelerated network investment, driving penetration and market share growth

Both expected to benefit from increased purchasing power and the sharing of best practices

ValuationAverage Revenue per UserHad the highest ARPUs – Rs. 374 (Avg. Rs

335)Market shareBuyer perspectiveValued Hutchison Essar at $18.8 billion or

$770 per subscriber

ValuationHutchison 100% enterprise value: $18.8

billionHutch Essar debt: $1.33 billionEquity Value: $17.47 billionValue of 67% stake: $11.10 billionOther Debt: $0.63 billionNet Value: $11.08 billion

Financing the dealleast leveraged$5 billion from the sale of its Japanese unit$1.62 billion cash from its 5.6 per cent

stake sale in Bharti.cash reserves in excess of $3 billion.sold its 25 per cent stake in Swisscom

Mobile and exited Belgium

Post MergerThe Vodafone-Hutch deal is one of the

largest M&A deal executed by overseas firm in Indian subcontinent

Vodafone business in India has been successfully integrated into the group

Has over 44 million customersVodafone acquisition of hutch is a major

contributor to its revenue, with over 50 per cent pro forma revenue growth

Thank You

From : Aditi Sharma Vishvendra Singh Rajput