Egyptian mobile operator Orascom has said it was open to sell a part of its 19.3 per cent stake in Hutchison Telecom International Ltd, a promoter of Indian cellular joint venture Hutch-Essar.
According to sources, Orascom is likely to shed its stake in HTIL to 12 per cent from 19.3 per cent at present. If that happens, on a pro-rata basis, its indirect stake in the Indian JV will decline to 6.21 per cent from 10 per cent now.
The stock of HTIL was down 4.8 per cent on the Hong Kong Stock Exchange to 16 HK dollar during trading on Tuesday. Essar has been opposing Orascom's presence in the JV, saying the Egyptian firm carried security concerns.
While announcing its quarterly results on Monday, Orascom had said in a statement it owns a 19.3 per cent stake in HTIL.
"It (Orascom) remains committed to its strategic relationship with HTIL -- its corporate governance rights and operating relationship in connection with the stake purchase
including representation on the board of HTIL and on the operating subsidiary boards of HTIL's most populous markets (India, Indonesia and Vietnam) as well as rights of first refusal over future share disposals by Hutchison Whampoa Ltd.
"These rights remain as long as Orascom Telecom maintains a minimum ownership of 12 per cent into HTIL," it said.
Orascom, which has been in the news for its indirect stake in India through Hutchison Essar said: "In light of current relative market valuations, Orascom continues to review all financial options including a partial sale for optimising value from its stake subject to retaining its existing corporate governance and other rights under the Shareholder Agreement with Hutchison Whampoa Ltd."
Investment banking sources said the Egyptian firm's plans to sell its stake indicated that the investment by Orascom in HTIL was financial in nature and not strategic.
With Essar group raising foreign investment component in the joint venture to 22 per cent, the level of foreign direct investment in Hutch-Essar has hit the limit of 74 per cent. This rules out any fresh FDI unless an existing foreign equity holding firm dilutes its shares.
The development comes amid reports that Orascom was interested in enhancing its holding in Hutch-Essar. Essar Group had objected to Orascom's entry into the Hutchison-Essar venture on grounds that such international deals could bring in investments from companies in unfriendly countries. Some security agencies as well as Prime Minister's Office had also expressed similar concerns.
The department of telecom, on the issue of source of FDI, has said FDI and security should be dealt with separately. The issue is important, as the Indian partner Essar had raised objections when Hutchison International sold about 19 per cent stake to Orascom. Essar has maintained that HTIL should have consulted it before taking any such decision.
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