Hutch moves court, Essar may follow

Bombay High Court to hear Hutch's appeal today.

Hong-Kong based Hutch today moved the Bombay High Court against its joint-venture partner Essar calling off the proposed sale of BPL Mobile, which runs lucrative GSM operations in Mumbai.

It has also sought to restrain Essar from selling BPL Mobile to any other party.

The legal situation may get complicated in the next few days as Essar is contemplating a counter petition.

Sources close to the development, however, said late at night that in its petition Hutch had left the door open for an out-of-court settlement, and requested the court to appoint an arbitrator for settling the dispute.

Essar had terminated the deal on Tuesday, citing a delay in regulatory approvals. Hutch had disputed the contention, saying that the necessary approvals had been obtained or waived.

Hutch sources said Essar's decision was regrettable and groundless.

"We have paid the vendors fully, and conditions precedent to this transaction have either been satisfied or waived," they added. The high court has admitted the petition, and posted it for hearing on Thursday.

After terminating the deal, Essar is learnt to have started looking for buyers for BPL Mobile. Although no official word was available, the market was abuzz with talk that a handful of companies had evinced interest in taking it over.

The list included Bharti, Reliance Communications, Idea, and Malaysia's largest telecom operator Maxis. Hutchison Essar had recently called off Aircel's acquisition as the requisite regulatory approvals did not materialise. Maxis later acquired Aircel.

As it appears at the moment, the battle will be centred on the money that Hutch claims to have paid Essar for BPL's mobile assets. Sources close to the Essar group confirmed that they had received Rs 1,600 crore out of a total consideration of around Rs 2,250 crore from Hutch.

"As per the agreement signed between Hutchison Essar and BPL Communications, which owns a 74 per cent stake in BPL Mobile, we are supposed to give the money back within five working days. We had offered them the money. Now, the case is sub-judice. We will go by the court order," they added.

The failure of the acquisition pulled the Hutch stock down by 5 per cent on the Hong Kong Stock Exchange on Wednesday.

Growth prospects in the Indian telecom space had played a large role in helping the stock more than double its value after its listing in 2004. The Essar group had bought a controlling stake in two mobile service companies from the BPL group for an enterprise value of $1.1 billion in July 2005.

Two months later, the group sold BPL Mobile Communications, which operates GSM services in Mumbai, and BPL Mobile Cellular, which operates telecom services in Maharashtra & Goa, Tamil Nadu and Pondicherry, and Kerala, to Hutchison Essar for $1.15 billion.