The Hindu Business Line : `Hutch not a good bet for Vodafone'

Even as the Vodafone board is meeting to consider bidding for Hutchison Essar, analysts say that the British telecom major may not realise the full potential if it were to acquire the Indian mobile business.

A JP Morgan report said that while this is the sort of deal Vodafone needs to do to raise its exposure to high-growth emerging markets and offset prospective EBITDA declines in Europe, investors should be concerned about the potential for value destruction. "Hutch Essar would be heavily competed for, with Vodafone seeming to us to lack the sort of synergies on offer for the most likely rival bidder," said a JP Morgan report release on Thursday.

"The pressure for Vodafone to do a deal in the next quarter is high, which raises the risk of potential overpayment," says a note from analysts at Bear Stearns.

By contrast, JP Morgan said that, "Reliance would be intent on merging Hutch Essar into its existing business, potentially releasing significant synergies on a scale that would seem to us to be well beyond anything Vodafone would be able to crystallise. A key area of potential savings for Reliance relates to capex.

"Conceptually we like the increasing focus by Vodafone into buying growth assets, but this must not come at any price and we fear the prices in India look like they are in a bubble at the moment," said an analyst at WestLB

JP Morgan further said lack of synergies and political relationships both point to Vodafone having to pay a sizeable multiple if any bid is to be successful.

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