The acquisition of Hutchison Essar of India by UK based Vodafone was carried out in 2007. This marked the penetration of Vodafone into the Indian telecom market and provided the opportunity to Vodafone to tap the huge potential of expansion in India. To this end, Vodafone set up plans to launch services like mobile entertainment, mobile banking and low cost handsets. The deal was welcomed by Sam Pitroda, the National Knowledge Commission chairman of India.
Vodafone acquired Hutchison Essar, the fourth largest telecom operator in India in 2007. Vodafone, the UK based mobile giant on the other hand is the highest revenue earning mobile service operator in the world. The Hutchison-Essar group contained 67 % stake of Hutch and 33% stake of Essar. Out of the total bid of 18.8 billion dollars, Hutchison's share of 67% amounted to 11.1 billion US dollars. The deal was reached after months of negotiations between the two groups and after Vodafone had outbid other prospective companies.
Arun Sarin the CEO of Vodafone was understandably excited by this acquisition. In his words, "Personally, I'm very excited about this because it fundamentally changes the type of business that we are". The huge growth potential of telecom in an emerging market like India is of course big reason to be excited about.
The important factors related to the acquisition of Hutch by Vodafone are -
- The potential of penetration in India is very high compared to Vodafone's prospects in other countries. The current penetration level in India is still quite low keeping in mind India's huge population.
- The average duration of mobile usage per user per month is India is higher than that in Europe. While this is 400 minutes in India, the average mobile usage per user in Europe in a month is only 150 minutes.
- Telecom regulations by the Indian government which are conductive to the expansion of cellular services in India.
With the penetration into the Indian market Vodafone set its plans to launch certain value added services to tap the Indian market. These include -
- Mobile entertainment services
- Mobile banking facilities.
- Low cost handsets.
The acquisition has been held in high esteem by the media as also the business circles both in India and UK and even in other parts of the world. Sam Pitroda, the chairman of the National Knowledge Commission of India also welcomed this deal.