The negotiated settlement between Hutchison and Essar depends heavily on Hutchison Essar's willingness to pay a higher price for BPL Mobile that operates in the lucrative Mumbai circle. Essar has 33 per cent stake in Hutchison Essar and the balance by Hutchison.
While both sides are not willing to comment, except saying that they are open to talks with each other for a negotiated settlement, sources familiar with the developments said with the valuation of telecom companies going up by over 30 per cent since December, a commensurate increase of valuation is the key to a settlement. However, it is still not clear as to when the meetings between the two sides would be held.
The two groups had entered into an agreement in September last year for the acquisition of Mumbai and three other circles and the deal was to be fructified by June 30 this year after all government permissions were received.
But Essar decided to terminate the agreement, as government permission did not come before the deadline.
Hutch, however, went to court challenging the decision, and the court has ordered the two companies to go in for arbitration after 30 days.
Sources pointed out that while the Mumbai acquisition was undertaken at a value of Rs 1,696 crore (with Rs 600 crore of debt), BPL Mobile would get a much higher price, with telecom share valuations going up sharply.
And the success of any fresh negotiation would depend on an increase in the acquisition price. A similar case had happened when Hutchison Essar had entered into a purchase agreement with Aircel to buy out its Tamil Nadu and Chennai circles. The deal was called off because approvals were not received and subsequently
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