Innomantra Viewpoint - Building Moonshots : May-Jun 2024.pdf
Vodafone hutch (1)
1.
2.
3. Vodafone Essar Hutchison Essar
•Operations : 2007
•Groups: Vodafone Plc + Hutchison Essar
•Headquarters : Berkshire, UK + Mumbai, IN.
•Industry : Mobile Telecommunications.
•Revenue : £ 35,478 Million
(14.1% Growth)
•Circles : 23 telecom circles in India
•Subscriber Base : 146.84 million
•M & A Background – Vodafone (Voice Data
Fone)
•Operations : 1992
•Groups: Hutchison Telecommunication
Intl Ltd. + Essar group
•Headquarters : Hong Kong + Mumbai.
•Industry : Mobile Telecommunications.
•Revenue : $ 1,282 Million
•Circles : 16 + license for 6 circles
•Subscriber Base : 29.2 Million
•M & A Background – Hutch – Essar
4. Background: HUTCH-ESSAR
• HTIL- Hutchison Telecommunication
International Ltd :
PARENT COMPANY: HUTCHISON WHAMPOA
FOUNDED: 1985
HEADQUARTERS : HONG KONG
• ESSAR GROUP:
Industry: Conglomerate
Founded: 1969
Headquarters: Mumbai, Maharashtra, India
5. • 1992: Hutchison Whampoa and MAX group establish
HUTCHISON MAX a joint venture between HTIL and Max
India Ltd
• 2000: Acquisition of Delhi operations and entry into
Calcutta and Gujarat markets through Essar acquisition.
Hutchison-Essar ltd (HEL) a Joint venture between HTIL
and Essar came into existance
• 2003: Acquired AirCel Digilink (ADIL — ESSAR Subsidiary)
which operated in Rajasthan, Uttar Pradesh East and
Haryana telecom circles and rebranded it 'Hutch'.
• 2005 : Acquired BPL Mobile operations in 3 circles. This
left BPL with operations only in Mumbai, where it still
operates under the brand 'Loop Mobile'.
Growth of Hutchison- Essar
6. Vodafone group .
The name Vodafone comes from voice data fone, chosen
by the company to "reflect the provision of voice and
data services over mobile phones".
Industry: Telecommunications
Predecessor(s):Racal Telecom (1983 to 1991)
Founded: 1991
Headquarters: London, United Kingdom
Key people: Gerard Kleisterlee(Chairman)
Vittorio Colao(CEO)
• They entered the Indian market with the acquisition of a 10
percent stake in Bharti Venture Ltd. in December 2005(now Bharti
Airtel Ltd.).
• also expanding globally in Europe and US by making some highly
paid merger and acquisitions in the corporate sectors.
7. Details of the acquisition
• On February 11, 2007 the most ferociously fought acquisition battle in
the Indian telecom sector came to an end.
• A 52% stake in HEL for US$13.3 billion ($11.1 bn plus $2 bn debt) from
(HTIL), 33% stake was still held by the Essar Group.
• 15% stake in the company was owned by Asim Ghosh (Ghosh),
Infrastructure development finance company (IDFC) and Analjit Singh.
• Major competitors - Reliance Communications Ventures Ltd. (Reliance),
Essar and the Hinduja group.
• FDI limit in the telecom sector was increased from 49% to 74% by
Government of India.
• In 2011: Vodafone Group buys out its partner Essar from its Indian
mobile phone business. It paid $5.46 billion to take Essar out of its 33%
stake in the Indian subsidiary. It left Vodafone owning 74% of the Indian
business.
8. Reasons for Exit of Hutch
• Urban markets had become saturated.
• Future expansion would have to be in rural areas, which
will lead to falling average revenue per user(ARPU) and
consequently lower returns on its investments.
• For HTIL the sale of overall stake in HEL has made it a 700%
return on its investment in India.
• Also the decision of HTIL for exiting was well timed as they
were expecting the fall of ARPU in India.
• Also the future expansion of the company was demanding
the heavy infusion of funds.
• HTIL also wanted to use this money to fund its businesses
in Europe.
So the decisions made altogether were proving out to be
advantageous in terms of their future plans.
9. WHY INDIA?
• Indian Telecom is the fastest growing sector – CAGR 22%
• Teledensity – 30.6
• Wireless Subscribers – 315 mn
• Lowest tariffs in the world after Bangladesh
10. Principle benefits for Vodafone
• The potential of penetration in India was very high
compared to Vodafone's prospects in other
countries.
• The average duration of mobile usage per user per
month is -
400 minutes – India & 150 minutes –Europe.
• Telecom regulations by the Indian government
which are conducive to the expansion of cellular
services in India.
• India benefits from strong economic fundamentals
with expected real GDP growth in high single digits.
11. WHY HUTCH?
• Accelerates Vodafone’s move to controlling
position in a leading operator in the attractive
& fast growing mobile market.
• It was the fourth largest service provider in
terms of customer numbers
• Delivers a strong existing platform in India.
• Increases Vodafone’s exposure to
high growth emerging markets.
12. How do you get your Employees,
Trade partners and 35 million
customers who are perfectly
satisfied with their current brand,
to welcome an absolutely new
brand overnight?
13. Business issues
• Hutch, the 2nd largest GSM brand in the Indian telecom
market had been bought by Vodafone.
• Hutch enjoyed considerable brand equity. It was also a
well-loved brand.
• With the penetration into the Indian market Vodafone
set its plans to launch certain value added services to
tap the Indian market. These include -
Mobile entertainment services
Mobile banking facilities.
Low cost handsets
14. THE PUG FACTOR
• "We were under pressure to not mess things up,
considering that this is such a big brand we're talking of!
But the most loved factor about Brand Hutch -the pug -
itself was the solution to our dilemma... We want
customers to know this brand just got better"
Rajiv Rao, Executive Creative Director, Ogilvy & Mather,
South Asia, in September 25, 2007.
• focused on one simple message: “Hutch is now Vodafone”
• Use the pug to import brand values of Hutch into
Vodafone.
15. Time frame
The entire project including positioning, retail identity,
campaign development and implementation was carried
out in less than four months, from June to September
2007.
Partnership activity
• Getting India to love Vodafone.
• 5 WPP agencies came together to help create magic on
21 September 2007.
• The Ogilvy team played the role of Brand Team leader
• Fitch to redesign Vodafone customer experience in
Stores.
• The launch campaign, one-on-one communication
with existing customers and customer touch-point
elements were developed by Ogilvy and Ogilvy One.
16. • There was a first of-its-kind alliance with Star where the
entire advertising was bought for Vodafone for 24 hours
across all the network’s 13 channels – the world’s first
24-hour TV roadblock.
• Ogilvy Action put up over 20,000 high-visibility outdoor
sites overnight, using over 2 million square feet of vinyl.
Outputs
• The launch was the most talked about event in Indian media
(450 articles)
• An entire episode of CNBC covered the transition as a case
study.
• Day-after brand recall for Vodafone was 80% – proclaimed by
the industry and media as one of the best brand-launch the
country has ever seen.
• 35 million customers transitioned seamlessly into brand
Vodafone. And within six months of launch, it became the brand
of choice for over 44 million subscribers.
17.
18. TAX CASE
• Tax is hutch’s liability, not vodafone’s. – TOI.
• Finance Bill 2008 - Capital gains Tax should be levied
on acquisitions in India.
• Buyer Must Pay Tax after Purchase of Capital Asset –
Share or Debenture of a Company.
• Buyer should Deduct TDS & failure to do so would leave
him Liable to pay Tax.
• Vodafone is asked to pay Rs. 11,000 crores as Tax.
• It argues that Vodafone, while paying the money to
HTIL, should have deducted capital gains tax and
deposited with the government.
• In this case, the holding company of Hutch's India
business was registered in Cayman Island, which was
sold to Netherlands-based Vodafone. As both the
selling and buying companies were based outside,
Vodafone interpreted that no tax will be charged on the
transaction.
• Court said – “no jurisdiction" to levy tax on overseas
transaction between companies incorporated outside
India. GOI thinks otherwise.
19. Conclusion
“Vodafone have successfully painted the town red ”
The simplicity and comprehensive
nature of the Hutch to Vodafone
transition campaign was a perfect
example of the successful entry of
a new brand into a market.
See how a well established hutch was taken over by vodafone and with meticulous planning and nourishment to d plan vodafone reached greater heights in the indian market.Give a brief of wat all is covered in the presentation..
HTIL- Hutchison Telecommunication International Ltd :PARENT COMPANY: HUTCHISON WHAMPOAname Vodafone comes from voice data fone, chosen by the company to "reflect the provision of voice and data services over mobile phones".Industry: TelecommunicationsPredecessor(s):Racal Telecom
For EXPLANATION – Principal benefitsThe principal benefits to Vodafone of the transaction are:Accelerates Vodafone’s move to a controlling position in a leading operator in the attractive and fast growing Indian mobile marketIndia is the world’s 2nd most populated country with over 1.1 billion inhabitantsIndia is the fastest growing major mobile market in the world, with around 6.5 million monthly net adds in the last quarterIndia benefits from strong economic fundamentals with expected real GDP growth in high single digitsHutch Essar delivers a strong existing platform in Indianationwide presence with recent expansion to 22 out of 23 licence areas (“circles”)23.3 million customers as at 31 December 2006, equivalent to a 16.4% nationwide market shareyear-on-year revenue growth of 51% and an EBITDA margin of 33% in the six months to 30 June 2006experienced and highly respected management teamDriving additional value in Hutch Essaraccelerated network investment driving penetration and market share growthinfrastructure sharing MOU with Bharti plans to reduce substantially network opex and capexpotential for Hutch Essar to bring Vodafone’s innovative products and services to the Indian market, including Vodafone’s focus on total communication solutions for customersVodafone and Hutch Essar both expected to benefit from increased purchasing power and the sharing of best practicesIncreases Vodafone’s presence in higher growth emerging marketsproportion of Group statutory EBITDA from the EMAPA region expected to increase from below20% in the financial year ending 31 March 2007 (FY2007) to over a third by FY2012
Li Ka Shing, Chairman, Hutchison. SOLD @ right time with 700% return on investmt in India.
"We were under pressure to not mess things up, considering that this is such a big brand we're talking of! But the most loved factor about Brand Hutch -the pug -itself was the solution to our dilemma... We want customers to know this brand just got better“- Rajiv Rao, Ogilvy & Mather, in September 25, 2007.
To show the transition from Hutch to Vodafone, O&M launched a rather direct, thematic ad showing the trademark pug in a garden, moving out of a pink coloured kennel (symbolising Hutch) and making his way into a red one (the Vodafone colour). A more energetic, chirpier version of the ‘You and I’ tune associated with Hutch, plays towards the end, as the super concludes, ‘Change is good. Hutch is now Vodafone’.
Fitch was briefed not to just redesign the store signage but to create a whole new store experience for the Vodafone customer
TAX slide can be explained with the Help of this Diagram.
Tax is hutch’s liability, not vodafone’s. – TOI.Finance Bill 2008 proposes to ensure that Capital gains Tax should be levied on acquisitions in India.Buyer will be Responsible for Paying tax after Purchase of Capital Asset – Share or Debenture of a Company.Buyer should Deduct TDS & failure to do so would leave him Liable to pay Tax.Vodafone is asked to pay Rs. 11,000 crore as Tax.It argues that Vodafone should have deducted the Tax at source while making payment to HTIL.Vodafone, while paying the money, should have deducted capital gains tax and deposited with the government. In this case, the holding company of Hutch's India business was registered in Cayman Island, which was sold to Netherlands-based Vodafone. As both the selling and buying companies were based outside, Vodafone interpreted that no tax will be charged on the transaction.
Most 70% of the m&a fail but here vodafone had made a exception
