The Story of the Cellular Phone Brand Orange

The Making of an Empire Contd...

Under such circumstances, Hutchison would not be in a position to acquire more shares and majority control. But, Hutchison had circumvented the 49% limits way back in 1998 itself. While picking up Max India's 41% stake in Hutchison Max Telecom (Max retained 10%), Kotak Mahindra Capital Company and Hutchison Whampoa's 100% subsidiary CGP India floated a new company, Telecom Investments India where Kotak owned 51% and CGP 49%. Telecom Investments then took over Max's 41% stake.

A similar deal could perhaps be struck with Essar. Again, analysts felt that with the government in the process of reviewing the 49% limits set on foreign ownership in telecom, Hutchison might not have to resort to such complicated ways of upping its stake in Essar's telecom ventures.

It seemed that the rationale behind Hutchison building up such a huge customer base was to help it get seamless connectivity across states and bring down prices, something that operators in individual circles would not be able to do. The fear among Indian operators was that they could end up as marginal players. Bharti Telecom and BPL were already planning to put forth a united front against Hutchison.

However, Hutchison was also cash rich. In November 1999, it sold its 44.8% stake in Orange to Mannesmann. When Vodafone acquired Mannesmann, Hutchison got 5% of Vodafone's share capital. In March 2000, the company sold 1.5% of these shares for $4.7 billion (Rs 20,445 crore). It was part of this money that Hutchison was using to fund its expansion in India. All the other Indian telecom service providers, put together, did not have that kind of ready cash.

Mobile Mania

By the end of 2000, mergers, acquisitions and alliances had become the order of the day in the cellular phone market. Commented Atul Chopra, Managing Director, New Delhi based investment bank, Asia Pacific Capital, who was involved in some of the telecom deals, "You can either acquire or get acquired. There is no third option." In March 2000, Business World wrote, "Once the dust settles down in less than 18 months, the number of players in the business will come down from 22 to five or six".

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Case Details

Case Code : BSTR002
Themes: Brand Management
Case Length : 8 Pages
Period : 1995-2001
Organization : Hutchison Telecom, BPL
Pub Date : 2001
Teaching Note : Available
Countries : India
Industry : Telecommunications

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