This story is from August 2, 2006

Hutch, Essar slugfest over Mumbai airwaves

Baiju Kalesh & Partha Sinha / TNN / Aug 2, 2006, 03:00 IST

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The spat between the partners of Hutchison Essar is getting vicious.

Hutch, Essar slugfest over Mumbai airwaves

MUMBAI: The spat between the partners of Hutchison Essar is getting vicious. The Essar group, which has interests in steel and oil, has called off an earlier deal to sell a lucrative cellular business in Mumbai to Hutchison Essar.
Essar has also accused Hutchison of weaning away over half a million customers and poaching it excutives to bring down the valuation of its Mumbai business.
The Hong Kong-based Hutchison had earlier allowed its agreement with Essar to acquire the Mumbai business expire after an extension on July 31 citing lack of regulatory approvals.
Though a senior Hutchison executive said they are now willing to take over Mumbai business without further deliberations, Essar seems to be in no mood to relent.

They have already started looking for another buyer. Sources say Idea Cellular is waiting to enter Mumbai and Malaysian player Maxis have been sounded out already.
Hutchison Essar partnership, which began in Delhi in late 90s, started off on a good note as Essar initially chose to be a silent partner. But, as valuations started to jump, Essar's ambitions grew and it used every opportunity to increase stake, slowly
On many occasions, Essar bid against Hutchison to up its stake.

Everything seemed alright until Li-Ka Shing of Hutchison Whampoa sold a 19.3% stake in Hutchison Essar's parent to Egypt's Orascom. The sale indirectly gave Orascom a 12.6% in Hutchison Essar and Essar could not digest another powerful partner.
Telecom experts say the fight will only hurt the two players. If Essar sells the Mumbai business to Hutchison Essar, it will stand to gain from the increased valuation of the partnership. Bringing in a new competitor in Mumbai will only make the business difficult for incumbents.
Essar is aware of the downside of playing traught. Essar group sources say "there is no breakdown point." "We are not breaking off, but only finding a solution to the rift, he pointed out.
However industry sources close to Hutch say the agreement say Hutchison is not a trouble maker and the agreement between the two for Mumbai circle is still valid.
Hutch holds another advantage. Regulations do not permit one operator to hold over 10% in two companies in the same circle. Essar will not be able to run the Mumbai business and retain its stake in Hutchison Essar.

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