21st September 2007

Presentation by:
KIRAN GOLAKIYA (09MBA10) YOGESH MODI (09MBA23) PRATIK PATEL (09MBA34) NISARG SHAH (09MBA39) JENISH THAKKAR (09MBA49) DEVDATT VYAS (09MBA52)
Mumbai, March 5, 2008 WFA/ISA - Global Advertiser Conference 2

INTRODUCTION
Meaning of Acquisition: ACQUISITION When one company takeover the other and become the new owner its termed as Acquisition In 1992 Hutchison Whampoa and its Indian business partner established a company that in 1994 was awarded a license to

provide mobile telecommunications services in Mumbai

By the time of Hutchison Telecom's Initial Public Offering in 2004, Hutchison Whampoa had acquired interests in six mobile telecommunications operators providing service in 13 of India's 23 licence areas and following the completion of the acquisition of BPL that number increased to 16.

In 2006, it announced the acquisition of a company (Essar Spacetel - A subsidiary of Essar Group) that held licence

applications for the seven remaining licence areas.

Then it also targeted business users and high-end post-paid customers which helped Hutchison Essar to consistently generate a higher Average Revenue Per User than its competitors.

Hutchison Essar
Established its presence in India1994. Acquired cellular license for Mumbai. Operations in 16 circles.

Customer around 20 millions.

Vodafone Group Plc

Vodafone Group Plc is the world's leading mobile telecommunications company Significant presence in Europe, the Middle East, Africa, Asia Pacific and the United States Group had 289 million customers till Dec, 2008 The Company's ordinary shares are listed on the London Stock Exchange and NYSE The Company had a total market capitalization of approximately 74

billion at 31 December 2008.

 The name Vodafone comes from Voice data fone, chosen by the company to reflect the provision of voice and data services over mobile phones.

Why Takeover
Vodafone need Vodafone wants to expand into the Asian markets. India has 2nd largest market for mobile. It is growing at the rate of 6 million subscribers per month. hutch want to sell Major Reasons for sell are : Hutch-Essar : mutual distrust The right time to quit Indian operations to finance other operations. Li Ka-Shing was the 10th richest man globally in 2006. In the early 1990s, he sold his stake in Star TV to Rupert Murdoch for $825 million.

Why Hutch was willing to sell its stake in Hutchison Essar?

Aid in creating value in emerging mobile markets and realizing the same for the benefit of shareholders at the right time HTIL Suffers loss of HK$768 million in 2005

Will able to generate huge cash for launch of operations in Vietnam and Indonesia
The Company did not declare any dividends for the year ended 31 December 2006. These are speculations as HTIL has not been discloses the reason for sale

Other players in lines are: Essar Group Anil Ambani-owned Reliance Communications

The UK-based Vodafone Private equity (PE) players. Malaysias Maxis Communications Egyptian Telco Orascom

Valuation
AVERAGE REVENUES PER USER It had the highest ARPUs Rs 374(Avg Rs335)

MARKET SHARE
$54.8 billion Vodafone bagged Hutchison Essar, it valued the company at $18.8 billion or $770 per subscriber

Valuation of Hutch Essar

-Value ($ billion) -Hutch Essar 100% enterprise value: 18.8 -Hutch Essar debt: 1.33

-Equity Value: 17.47

-Value of 67% stake: 11.10 -Other Debt: 0.63 -Net Value: 11.08

Financing the deal

least leveraged

$5 billion from the sale of its Japanese unit

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

cash reserves in excess of $3 billion.

sold its 25 per cent stake in Swisscom Mobile and exited Belgium

ACQUISITION DETAILS

Enterprise value of Hutchison Essar is $18.8 billion

Value of 67% stake in Hutch Essar - $11.1 billion

Vodafone is selling 5.6% stake in Bharti for $1.6 billion Vodafone will retain 4.4% in Bharti as pure financial investment Vodafone acquired 10% in Bharti for $1.5 billion in Oct 2005 Vodafone and Bharti to share infrastructure Hutch has 23.3 million subscribers as of Dec 31, 2006 Vodafone is targeting a 20-25 per cent market share by 2012

The mobile market is expected to grow at 40% CAGR till 2012

Synergies Claimed
Vodafone gets access to the fastest growing mobile phone market in the world that is expected to touch 500 million subscribers by 2010. Cellular penetration in rural India is below 2%, but 67% of

Indias population lives in rural India

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

3G is set to take off in India, allowing data and video to ride on cellular networks. Vodafone already offers 3G elsewhere in the world.

India is key to Vodafone strengthening its presence in Asia, a

region seen as the big telecom story.

EU pitches for Vodafone

European Union put pressure on Indian government to give Vodafone a fair chance in Hutch deal
Quote Unquote
"Any Indian company can come and buy any business in UK. We need to make sure it becomes a two-way process

The Indian government must give the UK based telecom company Vodafone a fair chance in the bidding for a stake in the Indian mobile service provider Hutch,

UK Secretary of State for Trade and Industry Alistair Darling

The European Union Trade, Commissioner Peter Mandelson

Legal Issues
Alleged that with the purchase of a majority of shares of the Hutch by Vodafone, the FDI in the telecom service provider had crossed 89.03 per cent FIPB seeks details on 15% stake held by minority shareholders Ashim Ghosh and Analjit Singh in its Indian mobile venture HutchEssar Court directs authorities to initiate prosecution under various sections of the Foreign Exchange Management Act (FEMA)

A petition against Asim Ghosh- MD Hutch, and Analjit Singh, saying huge amount of funds had been transferred through illegal routes to various countries.

Legal Issues continued

The stake is being held indirectly by the two individuals

against Asim Ghosh- MD Hutch, and Analjit Singh on

behalf of Vodafone.

The sale-breached India's Foreign Exchange

Management Act and the licensing conditions for

providing telecommunications services in India

TAX ISSUES
British Telecom giant Vodafone paid Hong Kong based Hutchison

International over USD 11 billion to buy Hutchisons 67% stake in

Indian telecom company Hutchison Essar. Since the deal was offshore, neither party thought it was taxable in

India.
It claimed that capital gains tax most people paid on the transaction and that tax should have been deducted by Vodafone while paying

Hutch.

Vodafone argued that the deal was not taxable in India as the funds were

paid outside India for the purchase of shares in an offshore company that
the tax liability should be borne by Hutch Vodafone having operational control over that Indian asset of Hutch. Two main aspects The tax officers are saying that Hutch is taxable on the profit they made from the sale - that is one aspect. The second aspect is that Vodafone as a payer was liable to deduct tax at source because they paid income to Hutch.

Men behind the deal

Superman' Shing at home in Hong Kong, 78-year-old Li Ka Shing is famed for his ability to exit businesses at the right price. His deal with Vodafone, would give him $11.1 billion, a coup considering he entered the Indian entity for as little as $2.6 billion. Li Ka Shing, Chairman, Hutchison Whampoa. Vodafone's CEO since 2003, Sarin's bid would give him access to 24.4 million customers in one of the world's biggest and fastest growing markets.

Arun Vodafone

Sarin,

CEO,

Li Ka Shing may call the shots in the Vodafone-Hutch deal. But 55-year-old Canning Fok is the man in the hot seat. Canning is best known for his push towards exiting the 2G space by selling out Orange in 1999, and using the $20-billion plus profits almost directly into 3G. Canning Fok, Chairman, Hutchison Telecom International Ltd focuses on mergers and acquisitions, real estate and technology law. His experience in the telecom, technology and media sectors includes assisting in domain name disputes, advising on patent strategy, drafting online trading rules for a stock exchange, and negotiating the procurement of a telecom network. D.Durai

IMMEDIATE CHALLENGES
The cellular telephony is extremely competitive, and India has one of the lowest ARPUs in the world. Besides, ARPU growth is slowing.

It has an uneasy equation with Essar, which is one-third partner in Hutch-Essar. That could be a source of problem.
The Vodafone brand is relatively unknown in the Indian market. Besides the brand will cost money and take time Telecom valuations are at a high and this could mean it is years Vodafone recovers its multi-billion dollar investment

Its big competitors are home-grown majors, who can manage the environment better.

STRATEGY TO GO AHEAD
REBRANDING OPERATIONS ESSARS OPTION

WHY HUTCH
Accelerates Vodafones move to a controlling position in a leading operator in

the attractive and fast growing Indian mobile market.

Hutch Essar delivers a strong existing platform in India. Driving additional value in Hutch Essar. Increases Vodafones exposure to high growth emerging markets .

Conclusion
Vodafone creating value in India
Controlling position in a leading operator with nationwide presence
Strong existing platform for growth

Additional value under Vodafone ownership

Increased Vodafones presence in high growth markets

Increased presence of big Global Players in India

Conclusion

Contd..

All games cannot win by all the team. Vodafone put their efforts to acquire hutch. In case of hutch and Vodafoneacquisition all issues are in favour of the both of the companies but the tax issue is quite problematic to the both the companies . As a good hope we can say that it is solve very soon. After acquisition of the hutch lets look out on the marketing strategies well as other strategies of Vodafone to successful compete in Indian market.

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ANY QUESTIONS???