Hutchison Telecom pays US$1.16 bln for India deal

HONG KONG (Reuters) - Hutchison Telecommunications International Ltd. said its India joint venture is spending US$1.16 billion to buy networks that will expand its footprint in the country's fast-growing mobile market.

Hong Kong-based HTIL, the emerging markets cellphone arm of tycoon Li Ka-shing's Hutchison Whampoa Ltd., has been looking to beef up its presence in India ahead of a planned initial public offering of its Indian venture.

Hutchison Essar Ltd., in which HTIL owns 53 percent, is buying BPL Mobile Communications Ltd. and BPL Mobile Cellular Ltd., which have a combined 2.8 million customers, for US$1.154 billion including assumed debt, HTIL said.

BPL Mobile Communications is the second-largest operator in the country's financial hub of Mumbai, where HTIL already operates. BPL Mobile Cellular operates in Maharashtra, Tamil Nadu and Kerala.

HTIL also said Hutchison Essar is paying US$6 million in cash for Essar Spacetel Ltd., which has applied for licences in seven service areas in which Hutchison does not operate.

Assuming that Spacetel receives its licences, the deals would give Hutchison Telecom a presence in all 23 of India's mobile market circles.

India had nearly 62 million cellular users at the end of August, but its mobile penetration rate is just 5.7 percent. By comparison, nearly 30 percent of China's population has a mobile phone.

MARKET APPEAL

HTIL's prospects in India have helped the company's shares rocket by 64 percent since it went public last year, despite regulatory hurdles that have slowed its plans for an Indian IPO. The stock was unchanged at HK$9.90 on Monday before the deal was announced.

"A combination of low penetration, low incremental capex cost per capacity, less regulatory risk and the potential for consolidation will ensure that India is one of the most exciting telecom markets in the world in the next six to 12 months," Morgan Stanley wrote in a recent note.

Hutchison's India unit competes with Bharti Tele-Ventures Ltd., Reliance Infocomm Ltd. and state-run Bharat Sanchar Nigam Ltd., which had market shares of 21.7 percent, 20.5 percent and 18.3 percent, respectively, at the end of August, according to JP Morgan.

Before Monday's deal, Hutchison's market share was 15 percent, with 9.3 million users.

"These are defining acquisitions for Hutchison Essar. By giving us the ability to complete our nationwide coverage, they position us to capitalise on the tremendous growth opportunities in India," HTIL Chief Executive Dennis Lui said in a statement.

The other shareholders in the joint venture are the Essar group, the Kotak Mahindra group, IndusInd Telecom and Max Telecom Ventures.

Of the purchase price, US$400 million will be contributed by Hutchison Essar and the remainder will come from bank borrowings.

HTIL has been on a deal-making spree since it went public last year. It has struck deals to enter the mobile markets in Indonesia and Vietnam, sold off its network in Paraguay and privatised its previously listed Hong Kong fixed-line arm.