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Vodafone to invest $2 bn in revamped Hutch

Hutchison Essar is all set for an investment binge with a new name and avatar after Vodafone’s acquisition of a majority stake in it, reports Indulal PM.

business Updated: Jun 15, 2007 22:02 IST
Indulal PM

Mobile phone operator Hutchison Essar is all set for an investment binge with a new name and avatar after European major Vodafone’s acquisition of a majority stake in it.

The venture will invest more than $2.0 billion (Rs 8,174 crore) towards capital expenditure in 2007 in the Indian market, Vodafone’s chief executive officer Arun Sarin said on Friday.

"Hutch Essar will be renamed as Vodafone-Essar soon," said Sarin, who arrived last Wednesday for the first board meeting of the company to kick off the integration process, which started with the reconstitution of the board.

The Essar group will have four board nominees and Vodafone eight including two independent directors under the new arrangement.

Vodafone Essar will target 1.5 million new subscribers every month, Sarin said. The company is planning to bring in low-cost handsets as part of a volume-driven growth strategy.

Analysts said Vodafone's plans to bring in low-cost handsets and share network infrastructure to cover more customers will increase competition in the countrty’s telecom industry.

"It is the fastest growing market and close to six million subscribers are being added every month. The move will definitely increase the competition," said an analyst at Mumbai-based Edeilweiss Securities.

Ravi Ruia, Prashant Ruia, Anshuman Ruia and Vikash Saraf will represent Essar in the new board, which will be chaired by Essar group vice-chairman Ravi Ruia. Sarin would be the vice chairman of the board.

Asim Ghosh, Paul Donovan, Gavin Darby, Vittorio Colao and Robert Barr are the Vodafone nominees ,while CR Dua and Analjit Singh will be independent directors.

"The constitution of the board marks the beginning of integration. This (integration) will be an ongoing process, but we hope to complete it by the end of September," Sarin told reporters.

In February this year, Vodafone had bought a controlling stake in the company after buying out a 67 per cent stake from HongKong's Hutchison Whampoa for $11.1 billion. The Ruias of Essar hold 33 per cent in the company.

The firm is talking to other telecom companies on sharing passive infrastructure to minimise operational costs. "We are very much interested in setting up a platform with whoever wants to join us so that we can build our network in India in a cost-effective way," Sarin said.

Vodafone Essar has already tied up with its main GSM (global system for mobile communications) rival Bharti Airtel for sharing telecom infrastructure.