Corus-like auction likely for Hutch Essar

Hong Kong's Hutchison Telecom may sell its stake in India's Hutchison Essar Ltd. through an open auction with a minimum reserve price of about $14 billion, the Hindustan Times newspaper said on Wednesday.

Officials of Hutchison Telecommunications International Ltd. could not immediately be reached for comment but the newspaper, quoting "highly placed" sources close to the deal, said the auction method would be similar to that used for the recent sale of Anglo-Dutch steelmaker Corus.

Europe's most valuable telecoms company, Vodafone Group Plc, India's Reliance Communications Ltd., Hutchison's local partner Essar and India's Hinduja group are pitted against each other to buy a 67 percent stake in Hutchison Essar. The Essar group controls the remaining 33 percent.

Analysts said selling India's fourth-largest mobile phone carrier in an auction was unlikely to result in significantly higher bids in a deal already estimated at $18-$20 billion.

"The valuations are steep any which way and if Hutchison opts for the auction route there won't be much action," said Sumit Modi, telecoms analyst with Emkay Share and Stock Brokers Ltd.

"The interested parties are already stretched too much. I think $18 billion would make sense and anything beyond this would not be justifiable," he said.

ELIMINATION GAME

The paper said Hutchison Telecom, controlled by Hong Kong's Hutchison Whampoa Ltd., would fix the minimum reserve price to eliminate bidders who were not serious, and said the enterprise value would be around $18-$20 billion including debt of $1 billion.

It said Hutchison Telecom, a unit of Hutchison Whampoa Ltd., was expected to hold an extraordinary general meeting (EGM) in the third week of February.

"After the EGM, the bids will be submitted and HTIL in consultation with the bidders will decide the rules of the game for its planned open auction," the paper said.

Last week, Corus went under the hammer in a nine-round auction that saw India's Tata Steel Ltd. beating Brazil's CSN with a $12.2 billion offer.

Bidding began by email with the rival teams in separate locations and went on half the night.

Reliance Communications and Britain's Vodafone are regarded as front-runners for Hutchison Telecom's stake in Hutchison Essar.

Vodafone has vowed not to pay "over the top" for the Indian carrier. Vodafone Chief Executive Arun Sarin said last week that final bids for Hutchison Essar were still weeks away.

India's mobile phone market is growing at about 6 million users a month although tariffs can be as low as 1 or 2 U.S. cents a minute.