Vodafone seems can’t get their hands off on the emerging markets, and now they seem to take over the stake in Hutchison Whampoa’s Essar Telecom in India for heck of a lot of money.

Can’t beat them…U join em eh???

Quoted:

British mobile phone giant Vodafone, grappling with intense competition in Europe, has tapped into the booming Indian economy after winning control of Hutchison Essar for US$11.1 billion.

Buying assets in emerging markets has become a priority for Vodafone as it struggles with a dramatic slowdown and saturated markets in western Europe, sector analysts said Monday.

In a move which signalled growing enthusiasm for investing in Asian economies, Vodafone said on Sunday that it would pay the equivalent of 8.5 billion euros to buy Hong Kong-based Hutchison Whampoa’s 67-percent stake in Hutchison Essar.

Vodafone has more than 200 million customers around the globe and is the world’s second-biggest mobile phone group after China Mobile in terms of users and stock market capitalisation.

“This deal helps Vodafone on a couple of fronts; finally bringing it significant emerging market growth as well as providing a balance sheet catalyst,” said Merril Lynch analysts in a note to clients.

The news was also welcomed by investors who sent Vodafone’s shares jumping 2.51 percent to 153 pence in mid-afternoon London trade. The British capital’s FTSE 100 index showed a fall of 0.26 percent at 6,366.10 points.

Merrill Lynch repeated its ‘buy’ recommendation the stock and kept a 165 pence target, arguing that although the deal “looks pricey”, the quick result will be taken as good news.

Including about two billion dollars’ worth of debt that Vodafone is to assume, the agreement values Hutchison Essar, India’s fourth-biggest mobile phone operator, at about US$18.8 billion.

According to Vodafone, Hutchison Essar has about 23.3 million customers nationwide in India at the end of December 2006, which was equivalent to about 16.4 percent of the country’s total mobile phone market.

Vodafone said on Sunday that it was targeting an increase of Indian market share to between 20 and 25 percent in five years.

India currently has about 150 million mobile phone users and a total population of approximately 1.1 billion people.

Fierce competition in its core European markets has put Vodafone on the back foot in recent years.

Vodafone has also struggled to cope with the write-down of assets bought at the height of the telecoms bubble - particularly related to the acquisition of German telecoms group Mannesmann in 2000.

Vodafone sold its 25-percent stake in Swisscom Mobile to Swisscom for 4.25 billion Swiss francs (US$3.49 billion, 2.65 billion euros) last year.

The group also sold struggling Japanese unit Vodafone K.K. to Japanese Internet group Softbank Corp for about 8.9 billion pounds.

At the same time, Vodafone snapped up Telsim, the second-biggest Turkish mobile telephone operator for US$4.55 billion, giving it an additional 11.7 million customers.

Broker JP Morgan cited the Telsim acquisition as evidence of its ability to absorb emerging market companies.

“Although the forecasts Vodafone is using to justify the (Hutchison Essar) bid price may be regarded as punchy, its track record at Telsim lends credibility when it comes to squeezing performance from emerging market assets,” JP Morgan analysts said. - AFP/de