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    Company

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    Mergers and acquisition-

    cost competency

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    Company

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    Merger In business or economics amerger is a combination of two

    companies into one largercompany.

    Such actions are commonlyvoluntary and involve stock swapor cash payment to the target.

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    Company

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    Acquisition

    An acquisition, also known

    as a takeover, is the buyingof one company (the target)by another.

    An acquisition may be

    friendly or hostile

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    Need to merge

    Gain market Share

    Economies of Scale

    Enter new Markets

    Acquire Technology

    Utilization of Surplus Funds

    Managerial Effectiveness

    Strategic Objective

    Vertical Integration

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    Company

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    VODAFONE

    purchased stake in

    HUTCH

    (Hutchison TelecomInternational)

    forUSD 11.08 billion

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    "The announcement is a clear evidence of how we are executing our

    strategy of developing our presence in the emerging markets. Hutch

    Essar is an impressive, well-run company that will fit well into the

    Vodafone Group

    -Arun Sarin, CEO, Vodafone Ltd., in February 2007

    "We exit the Indian market as one of the best capitalized telecom

    companies in the region which will enable us to react swiftly to new

    opportunities and to accelerate growth in our existing markets.

    -Canning Fok, Chairman, HTIL, in May 2007

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    Deal size andstake

    Fourth largest deal of the year 2007 (to date) at $13.3bn ($11.1 bn plus $2 bn debt). Hutchison Essar valuedat $18.8 bn.

    Regulatory

    Approvals

    Vodafone acquisition is subject to a number ofapprovals including from the Department of

    Telecommunications and the Government (FIPB).

    Foreign Direct

    InvestmentPolicy

    Press Note 5 of 2005 provides that direct and indirect

    foreign shareholding in a telecom company cannotexceed 74%.

    Departmentof Telecom

    The Department of Telecommunication has given its nodAll licensing conditions to be met by Vodafone.

    ForeignInvestmentPromotionBoard

    Application for an approval from the FIPB still not beenapproved due to issues relating to the total directand indirect foreign holding in Hutchison Essar.

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    least leveraged

    $5 billion from the sale of its Japanese unit

    $1.62 billion cash from its 5.6 per cent stake sale inBharti.

    cash reserves in excess of $3 billion.

    sold its 25 per cent stake in Swisscom Mobile and exitedBelgium

    Financing the deal

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    Synergies Claimed

    Vodafone gets access to the fastest growing mobile phonemarket in the world that is expected to touch 500 millionsubscribers by 2010.

    Cellular penetration in rural India is below 2%, but 67% ofIndias population lives in rural India

    Hutchison-Essar is not just the #4 player, but also one of thebetter-run companies with higher average revenue persubscribers.

    3G is set to take off in India, allowing data and video to ride oncellular networks. Vodafone already offers 3G elsewhere in theworld.

    India is key to Vodafone strengthening its presence in Asia, aregion seen as the big telecom story

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    Principal benefits

    The principal benefits to Vodafone of the transaction

    are: Accelerates Vodafones move to a controllingposition in a leading operator in the attractive and

    fast growing Indian mobile marketa) - India is the worlds 2nd most populated country

    with over 1.1 billion inhabitants

    b) - India is the fastest growing major mobilemarket in the world, with around 6.5 million

    monthly

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    Driving additional value in Hutch Essar

    a) - Accelerated network investment drivingpenetration and market share growth

    b) - Infrastructure sharing MOU with Bhartiplans to reduce substantially network opex andcapex

    c) - Potential for Hutch Essar to bring

    Vodafones innovative products andservices to the Indian market, includingVodafones focus on total communicationsolutions for customers

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    Hutch Essar delivers a strong existing

    platform in India

    a) Nationwide presence with recent expansion to 22 out of

    23 licence areas (circles)

    b) - 23.3 million customers as at 31 December 2006,equivalent to a 16.4% nationwide market share

    c) - Year-on-year revenue growth of 51% and an EBITDA

    margin of 33% in the six months to 30 June 2006

    d) - Experienced and highly respected management team

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    Increases Vodafones presence in

    higher growth emerging markets

    - Proportion of Group statutory EBITDA from the

    EMAPA region expected to increase from below

    20% in the financial year ending 31 March 2007(FY2007) to over a third by FY2012

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    Hutch becomes Vodafone from

    tomorrowERE

    To conquer the second-largesttelecom market in the world,

    Vodafone will spend around Rs

    300-400 crore (Rs 3 to 4

    billion) on an ad blitz spread

    over the next six to eight

    months.

    Vodafone-Essar will spend

    around Rs 10-15 crore (Rs 100

    to 150 million) a circle in the

    country, that would result in Rs230-345 crore (Rs 2.3 billion to

    3.45 billion) for the total 23

    circles. This would be mainly

    for the rebranding exercise,

    while an additional Rs 50-75

    crore (Rs 500 to 750 million)

    would be spent for

    advertisements, sources

    familiar with the development

    told Business Standard.

    The media blitz would include TV andnewspapers advertisements, while aportion would also go for hoarding and

    online promotional activities.

    STAR WAR

    Leading broadcaster Star India hasentered into an exclusive deal withVodafone Essar for the latter's re-branding campaign to Vodafone fromHutch.Vodafone ads will monopolise ad spaceon all Star Indias network channels for

    the next 24 hours. Till 2000 hrs, ISTSeptember 21 only Vodafone ads willair no other brands ads and nointernal promotions will be shownduring this period

    ECONOMIC TIMES

    Posted on Sep 20, 2007 at 16:36 - Since 1802

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    Main Pupose: Creating awareness (spreading

    information):

    firstly, the advertising aims to make

    the audience know that the product

    or service is available in the market

    and explain exactly what it is.

    Vodafones ad campaign Hutch is

    Now Vodafone was informative in

    nature.

    ECONOMIC TIMESPosted on Sep 20, 2007 at 16:36

    - Since 1802

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    Reasons for Hutchisons Exit

    a) Urban markets in the country had become saturated.

    b) Future expansion would have had to be only in the rural areas,which would lead to falling average revenue per user (ARPU)and consequently lower returns on its investments

    c) HTIL also wanted to use the money earned through this deal tofund its businesses in Europe

    d) The sale of its interests in India will enable Hutchison Telecomto become one of Asias best capitalized companies

    e) Relations between Hutchison Telecom and the Essar group ofIndia will be key to the sale of Hutch's 67% stake in Hutch-Essar

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    Immediate challenges

    a) The cellular telephony is extremely competitive, and India has

    one of the lowest ARPUs in the world. Besides, ARPU growthis slowing.

    b) It has an uneasy equation with Essar, which is one-thirdpartner in Hutch-Essar.

    c) The Vodafone brand is relatively unknown in the Indian

    market. Besides the brand will cost money and take time.

    d) Telecom valuations are at a high and this could mean it isyears Vodafone recovers its multi-billion dollar investment

    e) Its big competitors are home-grown majors, who canmanage the environment better.

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    Hurdles of the deal

    a) Telecom Watchdog, a non-governmental group, which alleged

    breach of foreign direct investment regulations.

    b) Ministry suggesting appointment of inspectors to investigate

    the actual ownership of mobile services company Hutchison

    Essar.

    c) The Foreign Investment Promotion Board (FIPB) had earlier

    sought the views of Law Ministry about Vodafone's proposed

    acquisition of Hutchison Telecommunication International Ltd's

    stake in the Indian mobile company.

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    THANK

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