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Vodafone Essar Hutchison Essar
•Operations : 2007
•Groups: Vodafone Plc + Hutchison Essar
•Headquarters : Berkshire, UK + Mumbai, IN.
•Industry : Mobile Telecommunications.
•Revenue : £ 35,478 Million (14.1% Growth)
•Circles : 23 telecom circles in India
•Subscriber Base : 146.84 million
•M & A Background – Vodafone (Voice Data Fone)
•Operations : 1992
•Groups: Hutchison Telecommunication Intl Ltd. + Essar group
•Headquarters : Hong Kong + Mumbai.
•Industry : Mobile Telecommunications.
•Revenue : $ 1,282 Million
•Circles : 16 + license for 6 circles
•Subscriber Base : 29.2 Million
•M & A Background – Hutch – Essar
Background: HUTCH-ESSAR
• HTIL- Hutchison Telecommunication International Ltd :
PARENT COMPANY: HUTCHISON WHAMPOAFOUNDED: 1985HEADQUARTERS : HONG KONG• ESSAR GROUP:Industry: ConglomerateFounded: 1969Headquarters: Mumbai, Maharashtra, India
• 1992: Hutchison Whampoa and MAX group establish HUTCHISON MAX a joint venture between HTIL and Max India Ltd
• 2000: Acquisition of Delhi operations and entry into Calcutta and Gujarat markets through Essar acquisition. Hutchison-Essar ltd (HEL) a Joint venture between HTIL and Essar came into existance
• 2003: Acquired AirCel Digilink (ADIL — ESSAR Subsidiary) which operated in Rajasthan, Uttar Pradesh East and Haryana telecom circles and rebranded it 'Hutch'.
• 2005 : Acquired BPL Mobile operations in 3 circles. This left BPL with operations only in Mumbai, where it still operates under the brand 'Loop Mobile'.
Growth of Hutchison- Essar
Vodafone group . The name Vodafone comes from voice data fone, chosen
by the company to "reflect the provision of voice and data services over mobile phones".
Industry: TelecommunicationsPredecessor(s):Racal Telecom (1983 to 1991)Founded: 1991Headquarters: London, United KingdomKey people: Gerard Kleisterlee(Chairman)
Vittorio Colao(CEO)• They entered the Indian market with the acquisition of a 10 percent
stake in Bharti Venture Ltd. in December 2005(now Bharti Airtel Ltd.). • also expanding globally in Europe and US by making some highly paid
merger and acquisitions in the corporate sectors.
Details of the acquisition• On February 11, 2007 the most ferociously fought acquisition battle in the
Indian telecom sector came to an end.
• A 52% stake in HEL for US$13.3 billion ($11.1 bn plus $2 bn debt) from (HTIL), 33% stake was still held by the Essar Group.
• 15% stake in the company was owned by Asim Ghosh (Ghosh), Infrastructure development finance company (IDFC) and Analjit Singh.
• Major competitors - Reliance Communications Ventures Ltd. (Reliance), Essar and the Hinduja group.
• FDI limit in the telecom sector was increased from 49% to 74% by Government of India.
• In 2011: Vodafone Group buys out its partner Essar from its Indian mobile phone business. It paid $5.46 billion to take Essar out of its 33% stake in the Indian subsidiary. It left Vodafone owning 74% of the Indian business.
Reasons for Exit of Hutch • Urban markets had become saturated.• Future expansion would have to be in rural areas, which will
lead to falling average revenue per user(ARPU) and consequently lower returns on its investments.
• For HTIL the sale of overall stake in HEL has made it a 700% return on its investment in India.
• Also the decision of HTIL for exiting was well timed as they were expecting the fall of ARPU in India.
• Also the future expansion of the company was demanding the heavy infusion of funds.
• HTIL also wanted to use this money to fund its businesses in Europe.
So the decisions made altogether were proving out to be advantageous in terms of their future plans.
WHY INDIA?• Indian Telecom is the fastest growing sector – CAGR 22%• Teledensity – 30.6• Wireless Subscribers – 315 mn• Lowest tariffs in the world after Bangladesh
Principle benefits for Vodafone
• The potential of penetration in India was very high compared to Vodafone's prospects in other countries.
• The average duration of mobile usage per user per month is -
400 minutes – India & 150 minutes –Europe.• Telecom regulations by the Indian government which
are conducive to the expansion of cellular services in India.
• India benefits from strong economic fundamentals with expected real GDP growth in high single digits.
WHY HUTCH?
• Accelerates Vodafone’s move to controlling position in a leading operator in the attractive & fast growing mobile market.
• It was the fourth largest service provider in terms of customer numbers
• Delivers a strong existing platform in India.• Increases Vodafone’s exposure to high growth emerging markets.
How do you get your Employees, Trade partners and 35 million customers who are perfectly
satisfied with their current brand, to welcome an absolutely new
brand overnight?
Business issues• Hutch, the 2nd largest GSM brand in the Indian telecom
market had been bought by Vodafone. • Hutch enjoyed considerable brand equity. It was also a
well-loved brand.• With the penetration into the Indian market Vodafone
set its plans to launch certain value added services to tap the Indian market. These include -
Mobile entertainment services Mobile banking facilities. Low cost handsets
THE PUG FACTOR
• "We were under pressure to not mess things up, considering that this is such a big brand we're talking of! But the most loved factor about Brand Hutch -the pug -itself was the solution to our dilemma... We want customers to know this brand just got better"
Rajiv Rao, Executive Creative Director, Ogilvy & Mather, South Asia, in September 25, 2007.
• focused on one simple message: “Hutch is now Vodafone”• Use the pug to import brand values of Hutch into
Vodafone.
Time frameThe entire project including positioning, retail identity,
campaign development and implementation was carried out in less than four months, from June to September 2007.
Partnership activity• Getting India to love Vodafone.• 5 WPP agencies came together to help create magic on
21 September 2007.• The Ogilvy team played the role of Brand Team leader• Fitch to redesign Vodafone customer experience in
Stores.• The launch campaign, one-on-one communication with
existing customers and customer touch-point elements were developed by Ogilvy and Ogilvy One.
• There was a first of-its-kind alliance with Star where the entire advertising was bought for Vodafone for 24 hours across all the network’s 13 channels – the world’s first 24-hour TV roadblock.
• Ogilvy Action put up over 20,000 high-visibility outdoor sites overnight, using over 2 million square feet of vinyl.
Outputs• The launch was the most talked about event in Indian media (450
articles)• An entire episode of CNBC covered the transition as a case
study. • Day-after brand recall for Vodafone was 80% – proclaimed by the
industry and media as one of the best brand-launch the country has ever seen.
• 35 million customers transitioned seamlessly into brand Vodafone. And within six months of launch, it became the brand of choice for over 44 million subscribers.
TAX CASE• Tax is hutch’s liability, not vodafone’s. – TOI.• Finance Bill 2008 - Capital gains Tax should be levied
on acquisitions in India.• Buyer Must Pay Tax after Purchase of Capital Asset –
Share or Debenture of a Company.• Buyer should Deduct TDS & failure to do so would leave
him Liable to pay Tax.• Vodafone is asked to pay Rs. 11,000 crores as Tax.• It argues that Vodafone, while paying the money to
HTIL, should have deducted capital gains tax and deposited with the government.
• In this case, the holding company of Hutch's India business was registered in Cayman Island, which was sold to Netherlands-based Vodafone. As both the selling and buying companies were based outside, Vodafone interpreted that no tax will be charged on the transaction.
• Court said – “no jurisdiction" to levy tax on overseas transaction between companies incorporated outside India. GOI thinks otherwise.
Conclusion“Vodafone have successfully painted the town
red ”
The simplicity and comprehensive nature of the Hutch to Vodafone transition
campaign was a perfect example of the successful
entry of a new brand into a market.
Thank you
Apurv Jain- 10Deeksha Mirakhur- 14Juhi Pancholi- 18Nishant Chachra- 26Pranavi Kapur- 28Pranay Chand- 29Rashne Gautam- 56Mili Vasani- 58
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