The Story of the Cellular Phone Brand Orange

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Case Details:

Case Code : BSTR002
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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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Making of an Empire

Hutchison had a presence in the cellular market in India since 1995. In December 1999, Hutchison picked up a 49% stake in Delhi-based cellular service provider Sterling Cellular.

Since then, another 2% seemed to have been acquired by a Hutchison associate company.7 The rest was held by the Essar group, which owned almost the entire stake in Aircell Digilink, the cellular license holder for Haryana, Rajasthan and Eastern UP.

In 1999, when the Essar group approached financial services company GE Capital Services for a loan of Rs 650, crore to pump into its cellular operations, it could manage to get the money only after the loan was guaranteed by its partner, Hutchison.

Analysts felt that Essar had already agreed to take the backseat in the venture.

In early 2000, when Business World contacted Asim Ghosh (Ghosh), Managing Director and CEO, Hutchison Max Telecom (India), he refused to comment on whether the Ruias would let Hutchison be the dominant partner in the cellphone services relationship.

But an Essar official commented, "Under the arrangement, Essar will not pull out of the telecom ventures for now, but Hutchison will call the shots. Essar will end up playing only a passive role in the arrangement." Essar officials held that the company had entered into a tacit agreement with Hutchison that Essar would exit from the telecom business in favor of the multinational when these telecom companies would go for an initial public offer (IPO) in the not-too-distant future. Hutchison would first acquire half of Essar's stake in these companies and then Essar would go to the primary market with an 'offer for sale' to offload the rest of its stake to the general public. That would leave Hutchison as the majority owner of the cellular telephone companies...

Excerpts >>

7] Government guidelines prevented a foreign operator from owning more than 49% of a telecom company in the country.


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