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Friday, May 19, 2006

Hutch Essar may not list this year

Hutchison Essar may not list on the bourses this year. The Indian arm of Hutchison Telecommunications International (HTIL) was expected to come out with an initial public offer (IPO) this year after it restructured the shareholding pattern in March to comply with FDI norms. But, HTIL CEO Dennis Lui said on Tuesday that the company is not in a hurry to tap the market as Hutchison Essar has strong capital reserves, international media reports said.

“We don’t want to set a timetable on this issue as there are too many factors out of our control,” he was quoted as saying. “The Indian unit could still grow as fast as we expected without going public,” he added. Hutchison Whampoa’s group MD Canning Fok said in March that he expected Hutchison Essar to list this year. “The simplified structure is an important step to prepare for a potential listing of Hutchison Essar and conforms to India’s new regulations on foreign direct investment in mobile telecommunications operators in India,” HTIL had said in March.

But, it had not specified any timeframe for the proposed listing. India is the biggest contributor to HTIL’s revenues, accounting for 72.9% of total subscribers. HTIL said earlier it would invest up to HK$10bn in the India market this year. Post-restructuring, Asim Ghosh, MD, Hutchison Essar and Analjit Singh, founder, Max Telecom, had become shareholders in the company. HTIL holds 49.8% in Hutchison Essar while Mr Ghosh has 4.7%, Analjit Singh (7.6%), Essar group (33%) and Hindujas (5.1%).

Meanwhile, the acquisition of BPL Group’s mobile business may have expanded Hutchison Essar’s footprint, but it has shrunk the telco’s average revenue per user per month (ARPU). Hutch, which had a blended (pre-paid and post-paid) ARPU of Rs 511 in the quarter ended December ’05, has seen a drop of Rs 57 during January-March ’06. This is the highest ever quarterly fall in ARPU witnessed by Hutchison.
On a year-on-year basis, Hutch’s ARPU has fallen 20% from Rs 568 in the quarter ended March ’05 to Rs 454 in the corresponding period of the last fiscal, according to figures announced by Hutchison Telecommunications International (HTIL) in its quarterly results.

The acquisition of BPL Mobile’s operations in Tamil Nadu, Maharashtra and Kerala circles in January ’06 brought 1.6m customers to Hutch, the strongest net additions to its customer base in a single quarter. Hutch had nearly 15.4m users in India, of which, nearly 3m are pre-paid while the rest are post-paid.

However, this subscriber addition resulted in reduction of Hutch’s pre-paid ARPU from Rs 310 in the December ’05 quarter to Rs 285 in the March ’06 quarter while for post-paid users, it went down from Rs 1,155 to Rs 1,118 during the period.

“The acquisition of BPL Mobile’s subscribers, which did not have high ARPUs, has affected the average revenue per user for Hutchison Essar. The company is unlikely to recover in forthcoming quarters as ARPUs continue to fall following reduced tariffs and increasing number of low-end subscribers,” said an analyst.

In line with industry trends, Hutch’s ARPU, has been reducing every quarter. However, due to the sudden dip, Bharti Airtel is closing the ARPU gap with Hutch. In the December quarter, Bharti’s blended ARPU was Rs 470 as against Rs 511 of Hutch, a difference of Rs 41. In the March quarter, while Hutch’s ARPU was Rs 454, Bharti was just Rs 12 away at Rs 442.

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