Reliance has $17 bn Hutch-Essar pledges

Mumbai: Reliance Communications Ltd has received commitments of $2 billion from private equity firms for a bid for Indian mobile operator Hutchison Essar, and $15 billion from banks, a newspaper said on Saturday.

In return, the four private equity firms were seeking 10-12 per cent of Hutch-Essar in the event that Reliance Communications, India's second-largest mobile phone carrier, made a successful offer, the Business Standard newspaper said.

Sources said last week private equity firms Kohlberg Kravis Roberts, Blackstone and Carlyle were interested in Hutch-Essar and Reliance Communications chairman Anil Ambani has said he has the backing of global financial institutions for a bid.

Newspapers said Apax made a fourth in the private equity companies prepared to partner Reliance Communications.

"RCL has commitments from banks for providing the remaining $15 billion," the Business Standard newspaper said, citing sources close to the development.

Separately, the Economic Times said the four private equity firms could jointly contribute $2.5-3 billion to a possible bid, although it was not clear if they had committed that amount.

The paper also said Reliance Communications may offer the four 15 per cent in Hutch-Essar and had lined up more than $12 billion in bank funding.

A Reliance Communications spokesman declined comment.

The firm, which has declared its interest but not yet made any offer public, holds a board meeting on January 10 to decide on fund raising.

Britain's Vodafone Group Plc and India's Hinduja group, which runs Hinduja TMT and bus and truck maker Ashok Leyland, have both expressed interest in Hutch-Essar, in a deal estimated at $17-20 billion.

The Business Standard said Reliance Communications had not yet committed to any of the private equity firms and was also in talks with billionaire financier George Soros, Warburg Pincus, Texas Pacific Group and Singapore's Temasek.

It was expected to make a bid after January 14.

Hutch-Essar, India's fourth-largest mobile carrier, is 67-per cent owned by Hong Kong-based Hutchison Telecommunications International Ltd and 33 per cent controlled by India's Essar group.

Essar, which is controlled by the Ruia family, is reported to be interested in buying the rest of the joint venture and has a right of first refusal should Hutchison decide to sell.

However the two are reported to differ over interpretation of the refusal rights and a source familiar with the situation told Reuters on Friday these would come into play only if Hutchison opted to sell to one of three local rivals – Reliance Communications, Bharti Airtel and the Tata group.

The Hinduja group, which has said it is interested in a controlling stake, was not included among the buyers over which Essar would have pre-emption rights, the source said.

Essar says however that this is Hutchison's interpretation and it has the first right of refusal.

Hutch-Essar has been the subject of takeover interest since plans for an initial public offering were scrapped over disagreements between the two partners and Hutchison has said it has received proposals but not given any details.

The mobile carrier has 22.3 million customers and a 15.6 per cent share in India's mobile phone market, the fastest growing major cell phone market in the world.

The Government expects 180 million mobile users by the end of 2007, compared with about 143 million now.