Vodafone ropes in UBS as advisor

Likely to make an all-cash bid for Hutchison Essar.

Vodafone has set the ball rolling for acquisition of a "controlling interest" in Hutchison Essar by appointing the UBS Group as advisor for the transaction.

"We will fund any potential transaction in cash," said Bobby Leach, director (media relations), Vodafone.

A media release from London after a meeting of the company's board today said, "Such a transaction would be consistent with Vodafone's stated strategy of seeking selective acquisition opportunities in developing markets."

With this move, Vodafone has joined a bidding war for India's fourth largest mobile firm. Also in the fray are the Anil Dhirubhai Ambani Group and Maxis Telecom of Malaysia.

Though the statement said the pitch was at an early stage, sources said a bid was expected soon. Actual negotiations are expected to take place after the Christmas vacations.

Vodafone is reportedly looking at a $13.5 billion bid for Hutchison Telecommunications International Ltd's (HTIL's) 67 per cent stake in Hutchison Essar, fixing the company's enterprise value at around $18 billion.

Vodafone's main rival in this race, the Anil Dhirubhai Ambani Group, is learnt to have already revised its bid to $15-17 billion for a 100 per cent stake in the company. Sources close to the development said it might raise the bid by another $1 billion.

Meanwhile, admitting for the first time that it had put Hutchison Essar Ltd on the block, HTIL said in a statement from Hong Kong that it had been approached by various parties for the sale of its equity interest.

However, it added "No agreement has been entered into up till today and there are no assurances that a sale may occur from these approaches."

Sunil Mittal, the chairman of Bharti Airtel, in which Vodafone held ten per cent, admitted that the company had informed him of the developments.

When asked if Vodafone would exit Bharti Airtel in case its bid for Hutchison Essar succeeded, he said, "We have to engage on those issues once Vodafone makes a bid and that is accepted."

In a day of hectic developments, the Hutchison Essar board met in Mumbai, though the company's managing director, Asim Ghosh, said only routine matters were discussed.

It is learnt that some merchant bankers are trying to get Vodafone and the Anil Dhirubhai Ambani Group to make a joint bid for Hutchison Essar.

As existing rules prohibit a foreign company from owning more than 74 per cent in an Indian telecom company, Vodafone needs a domestic partner in Hutchison Essar.