Vodafone Wins Hutchison Essar for $11.1 Billion

Vodafone has won out over Reliance Communications and the Hinduja Group in an auction for Hutchison Essar, the fourth-largest cellphone company in India. Vodafone will purchase 67% of the company -- the Hutchison portion -- for $11.1 billion. The deal values Hutchison Essar at $18.8 billion including about $2 billion in debt. Vodafone is expanding into emerging markets as wireless growth slows in an increasingly saturated Western Europe. India, where less than 20% of the population of 1.1 billion owns a cellphone, is considered to have even greater penetration potential than China. India has around 6.5 million new subscribers a month, and the purchase will give Vodafone a 16% share of the market. Analysts consider the price tag high, but the company believes their doubts will be allayed by the Indian economy's 9% annual growth rate and the infancy of the Indian cell phone industry. In related news, Vodafone has given Indian cellphone operator Bharti Airtel the option to buy back 5.6% of Vodafone’s 10% stake in that company for $1.6 billion. Vodafone has also inked a deal with Citigroup to offer a cellphone-based money transfer service and deals with Google to provide YouTube videos and Google maps via cellphone.

Sources: Bloomberg, Reuters, Wall Street Journal, MarketWatch, GigaOM
Commentary: Vodafone Makes Smart Move In India • Bidding War For Hutchison Essar Heats Up, Possibly Leaving Vodafone Out In Cold • Vodafone In Booming Indian Wireless: Tread Carefully
Stocks/ETFs to watch: Vodafone Group plc (VOD), Hutchison Telecom Intl. Limited (HTX). Competitors: Telecom Italia S.p.A. (TI), NTT DoCoMo (DCM), Sprint Nextel (S), France Telecom (FTE), Deutsche Telekom (DT). ETFs: Wireless HOLDRS (WMH), iShares S&P Global Telecommunications (IXP)

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