Vodafone Moving for Hutchison Essar's

[vodamod]

Vodafone is facing a new rival in its effort to win control of India's fourth-largest mobile phone operator, media reports say. Hutchison Essar's 33 percent Indian shareholder, Essar group, has approached one potential bidder, Britain's Vodafone, about a carve-up deal, one press report said.

Other reports have said Essar wants to buy out the whole business in a deal valuing Hutchison Essar at $17-$18 billion, while the Financial Times said Vodafone had made a solo bid with a similar valuation.

Hutchison relies on India and its 67 percent Hutchison Essar stake for an estimated four-fifths of operating income. The Hong Kong firm is expected to end 2006 in the black after a hefty 2005 loss.

Hutchison Essar is poised to ride swelling demand growth over the next half-decade. Analysts say mobile penetration could double over two years from 12 percent now, and triple in four years. India's government expects 180 million mobile phone users by end-2007, up more than 25 percent from 143 million now.

Hong Kong-based Hutchison Telecom has been an avid deal maker across Asia. But long-cherished hopes of listing its Indian business have been hampered by regulatory changes amid a dispute over local acquisitions with partner Essar, a conglomerate controlled by India's Ruia family.

Vodafone has confirmed it is considering making an offer, and both Hutchison Telecom and its parent, billionaire Li Ka-shing's Hutchison Whampoa (0013.HK), have confirmed receipt of approaches.

Hutchison Telecom, which runs networks in Hong Kong, Thailand, Israel and elsewhere, says its subscriber base in India had more than doubled to 20.4 million by the end of September in an overall base of 26.5 million users.

An $18 billion offer would imply an enterprise value some 27 times estimated 2006 earnings before interest, tax, depreciation and amortization -- more than double the valuation of Reliance Comm, Goldman Sachs reckoned.

Other potential suitors include private equity giant Texas Pacific along with Malaysia's Maxis, and India's own Reliance, the country's second-largest mobile operator, via a tie-up with private equity group Blackstone, sources and newspaper reports say.

Buying Hutchison Essar would boost Vodafone in a market where its existing interest is limited to a 10 percent stake in industry leader Bharti Airtel.

India's Business Standard newspaper reported on Thursday that Bharti would start talks on "disengagement" from Vodafone when the UK company had firmed up a plan for India.

Hutchison Telecom shares have benefited from all the talk. The stock has risen some 12 percent since speculation of a bid surfaced in early December. .