Hinduja not included among buyers

HONG KONG: The Essar group, keen to buy out Hutchison Telecom's 67 percent stake in their Indian cellphone joint venture, would have the right of first refusal only if Hutchison opted to sell to one of three local rivals, a source familiar with the situation said on Friday.

The most recent bidder to emerge, India's Hinduja group, is not included among the buyers over which Essar would have pre-emption rights.

Essar and Hutchison Telecommunications International Ltd., a unit of Hong Kong conglomerate Hutchison Whampoa Ltd., are reported to differ over Essar's refusal rights in the event that Hutchison were to sell, a deal that would be worth an estimated $17-$20 billion.

The source said that Essar has the right of first refusal only if Hutchison Telecom sold its holding to domestic players Reliance Communications, Bharti Airtel Ltd., and the Tata group.

Of the three, Reliance, the country's No. 2 mobile carrier, has expressed interest in buying a stake in Hutchison Telecom.

UK-based global giant Vodafone Group Plc, which has a 10 percent stake in market-leading Bharti, has also expressed an interest in Hutchison Essar.

The Hinduja group, which runs Hinduja TMT and bus and truck maker Ashok Leyland, told Reuters on Thursday that it had expressed its intention to Hutchison Telecom that

it would like to buy a controlling stake in Hutchison Essar, and was waiting for a response.

Hutchison Whampoa spokeswoman Laura Cheung, asked to confirm the right of first refusal terms, said, "the first right of refusal relates only to certain Indian companies."

She declined further comment.

However, Essar, which holds 33 percent of the joint venture, stuck to its position.

"That's their interpretation," said an Essar spokesman. "The fact is that we have the first right of refusal."

He did not elaborate further.

Hutchison Essar, which is India's fourth-largest mobile service provider, has been the subject of takeover interest since plans for an initial public offering were scrapped over disagreements between its two partners.

India is the fastest-growing major cellphone market in the world, and the Hutchison Essar business is regarded as the crown jewel within Hutchison Telecom, which operates in Hong Kong, Israel and several emerging markets including Thailand, Sri Lanka and Ghana.

The Hutchison group has acknowledged receiving proposals from interested parties but has not provided specifics.

Hutchison Essar has 22.3 million customers and a 15.6 percent market share in India.

The takeover talk has driven shares in Hutchison Telecom up by 37 percent over the past three months. The stock was up by 0.53 percent on Friday morning at HK$18.86.

(Additional reporting by M.C. Govardhana Rangan in Mumbai)