Verizon may bid for Hutch stake

Essar, HTIL in talks to resolve dispute over first right of refusal

The battle for control of India8217;s fourth-largest mobile operator, Hutchison Essar, is likely to intensify, with a prospective buyer in the US telecom space set to join the list of potential buyers. Verizon Communications, which has a market capitalisation of more than 108 billion on NYSE, is the latest name being churned out by rumour mills for the firm.

While a spokesperson of the US firm said it was the company8217;s policy not to comment on 8220;this kind of speculation,8221; industry sources said the move could be strategically important for Verizon as the US market was near saturation and the Indian market offers great growth opportunities. Incidentally, Verizon Communications offers wireless services in the US through Verizon Wireless, a joint venture with Vodafone, one of the interested parties for Hutch Essar.

International media reports said questions are being raised over continuation of the joint venture between Vodafone and Verizon in the US. The British telecom firm owns 45 per cent stake in Verizon Wireless. The JV company has 56.7 million customers and revenues of more than 32 billion. Questions over Vodafone8217;s commitment to the American market have been revived by a potential 22 billion sale of Alltel, the fifth-biggest mobile operator in the US.

So far, UK8217;s Vodafone Group and India8217;s Reliance Communications are the only two potential bidders to have made public their interest in acquiring Hutch Essar.

On the other hand, Essar vice-chairman Ravi Ruia and director Prashant Ruia began fresh round of talks with Hong Kong-based Hutchison Telecom International which has put its Indian joint venture on the block.

Sources close to the development said Ravi Ruia and Prashant, son of group chairman Shashi Ruia, are believed to be talking to their foreign partner HTIL possibly to resolve the differences on the first right of refusal. The first right of refusal arms Essar with the power to match the highest bid for HTIL8217;s stake by any other suitor.

Asked if HTIL, which has been talking to various interested parties, has taken a view on Indian partner Essar8217;s offer to buyout its 67 per cent stake, a company spokesperson said: 8220;We don8217;t comment on speculation.8221; On whether Ruias have started another round of talks with HTIL in Hong Kong, the spokesperson declined to comment. Essar spokesperson and other officials could not be contacted.

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Sources, however, said both Essar and HTIL are understood to have taken legal opinion on the contentious issue of first right of refusal to emphasise their viewpoint. In case the issue is not resolved amicably and HTIL decides to sell stake to any another suitor without Essar8217;s consent, then a legal battle could not be ruled out, the sources said.

While Essar is understood to be emphasising that its 33 per cent stake gave it the first right of refusal, HTIL is believed to be pointing out that out of this, only 11 per cent was Indian, while the remaining was through foreign entities. HTIL is understood to be arguing that with anything less than 24 per cent of Indian holding,

Essar would forfeit its right of first refusal. Vodafone and Reliance can bid only when Essar says it8217;s not interested in buying the stake of HTIL.

8212; With PTI