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GLOBALISATION came calling on Sunday. Exactly 11 days after Tatas bought Corus, the biggest steel firm in the UK, it was the turn of a UK telecom major to reverse the roles.

UK telecom giant Vodafone has emerged as the front runner to buy a 67% stake in Hutchison Essar (HEL) at an enterprise value of $19.3 billion (Rs 86,000 crore), paving the way for the biggest-ever acquisition in India. Hutchison Telecom, owned by Hong-Kong billionaire Li Ka-shing, is expected to issue a formal announcement on Monday. Shortly after the news broke on Sunday, the Essar group, which had also placed a bid for HEL, sprung a big surprise. In a clearly conciliatory statement issued by its vice-chairman Ravi Ruia, Essar confirmed that it had received an offer to partner Vodafone and was evaluating all options.

"This is a good price which reflects the premier position of Hutchison Essar as India's leading operator. We are delighted that Hutchison and Essar have together created this value." This was in stark contrast to the incessant squabbling between Hutchison Telecom and the Essar group over the past few months. The Ruias also signalled that they may choose to remain invested in HEL by maintaining that the group "is a strategic player in the infrastructure development in India and neighbouring countries. Telecommunication is a core business for Essar Group and we continue to create value in this sector both within India and globally." Vodafone has also made similar offers to the other existing shareholders, Analjit Singh and Asim Ghosh to stay on as partners and retain their combined stake of 12.26%.

Mr Singh told ET that "the deal is good for the consumer and good for the country. I have agreed in-principle with Vodafone to be one of the Indian partners." Mr Ghosh could not be reached for comment. In another interesting twist, experts do not rule out a broad involvement of Bharti Airtel with Vodafone. However, this could not be confirmed.

As per India’s FDI norms, foreign companies cannot hold more than 74% in Indian telecom entities. In the case of HEL, foreign holding is already 74%, of which 22% is held by Essar through a clutch of investment companies based in Mauritius. This means that the UK telecom firm may look at holding a controlling stake of 52% in HEL. Earlier on Sunday evening, news trickled in of the much-awaited
teleconference between the Hutchison Whampoa chairman Li Ka-shing and Hutchison Telecommunications International (HTIL) CEO Canning Fok, to discuss the bids submitted by Vodafone, Reliance Communications (RCL), Hindujas and the Essar Group, which owns 33% in HEL. While Mr Fok is currently camped in London, the billionaire owner of Hutchison is based in Hong Kong.

Sources say the Hindujas is said to have closely followed Vodafone and emerged as the secondhighest bidder with a marginally lower price than that quoted by Arun Sarinled Vodafone. Surprisingly, Reliance Communications, which was expected to be a serious contender, did not come up with an aggressive bid. Immediately after congratulating Vodafone for topping the bidding battle, the Hindujas confirmed to ET that they would they would not place any revised bid, indicating that there would be no further rounds of bidding.

Hutchison Telecom hopes to identify a preferred bidder by Lunar New Year, which begins on February 17, the South China Morning Post newspaper in Hong Kong said on Saturday. A source told Reuters, however, that it could be a month before a final decision was made.

Controversy has dogged the battle for HEL. Much of it centred around the Ruias, who had been insisting on exercising the right of first refusal (ROFR). The Essar Group contended that this right was exercisable, irrespective of who bid for HEL. Hutchison insisted that it was restricted to the Tatas, Bharti Airtel and RCL. Essar had also roped in Mumbai-based law firm Doijode Associates to take the case forward, in case ROFR was infringed, sources said. Yet in the end, with valuations topping an eye-popping $19 billion, even the Essar group may have decided that it made more financial sense to reap the rewards.

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