Wall Street Journal writer, Henny Sender writes that Hucth Essar could be for sale at a price tag of $8 Billion or possibly more plus the debt. We all know that Hutch and Essar are corporate partners at fight. Just two days ago, Mr. Raza from Hutch tipped me that their Deputy MD, Mr. Das had resigned after a 13 year old stint with Hutch-Essar to join Maxis as its CEO.
I am not sure what prompted Henny to write write that Blackstone Group and Texas Pacific group are considering possible buyout of Hutch. Blackstone Group is rumored to be in talks with Anil Ambani of Reliance Communications Ltd as Anil is desperate to start Pan-India GSM operations. But going by the Ambani family track record, they are the ones who will build from scratch [atleast Dhirubhai and Mukesh have that track record] and will consider BUY-OUT only if they get a deal 🙂
Lets consider the valuations of Hutch Essar. At the end of Q3-2006 [Sept-06], Hutch had a subscriber base of 13.7 Million. At the end of the same quarter, Bharti Airtel Ltd had a subscriber base of 26.25 Million. Bharti Airtel since then has added 3.15 Million subscribers and its market cap as on Dec-07 is $27 Billion. 71% of Bharti Airtel’s revenues are from Mobile services [Q4 report 2005-06, Bharti Tele-ventures Ltd] . On a pro-rated basis, Airtel’s valuation for Mobile business would be $19.1 Billion. Airtel is the fastest growing Mobile company in India [and the world ?]. Airtel also has the highest ARPU [Avereage Revenue Per User] at Rs 442 [$10] / Month. So if Airtel Mobile services were to be bought one has to shed $650 / subscriber. Maxis had paid half the amount [$317 / subscriber] while acquiring Aircel a year ago. At $8 Billion and assuming Hutch has a customer base of 17.5 Million [ I am not positive, but this is the figure I have got] buyer will be paying $457 / subscriber which sounds reasonable but how much is the debt component ?
I am still inclined to bet that, Anil Ambani may not team with Blackstone Group and will rather opt to build his existing [GSM Wireless division] Reliance Telecom. Time to think if you own stocks of Reliance Communications Ltd 😉
Tags: Mobile India, Telecom India, Blackstone Group, Texas+Pacific , Private Equity
It is understandable that Dhirubahi and Mukesh have a track record of building from scratch. Kudos to them !!!, Unlike Laxmi Mittal who is into buying sick units and turning them around. Both are opportunists, however they see opurtunities in different times I believe.
Most businesses in India have been starting from scratch in the last so many decades. During those decades there were NOT plenty of business situations as we have started to see this decade (in the 21st century). Considering the GSM foot-print made by other mobile juggernauts, it may be too late for Anil to start from scratch.
Larry Ellison of Oracle Corp. also had a great track record of building everything in-house, however he did buy his way into the Business applications companies when he realized he was too late to the market (Oracle bought PeopleSoft). Sooner or later everybody has to adapt to the rapidly changing business environment.
It’s just a matter of time.
AnonymousCoward just said >> “It’s just a matter of time.” Hmmm. Aggree it is just a matter of time.
However considering the fact for now, that not even 10% of the Indian population owns a mobile phone, which means there’s a lot of room to grow. For now, I believe Anil can also start from scratch and still could compete with the existing GSM giants in India. Alas he also has to prove the same that his brother and father proven and do good for their share holders and for India.
So regardless I say that time is not there yet !!!