In 1995, just months after mobile telephony in India was opened up to private participation, Essar became the first company to start GSM operations in Delhi under the brand name, Essar Cellphones and roped in Swiss PTT as a joint venture partner.
Essar acquired licenses for the telecom circles of Eastern UP, Rajasthan, Haryana and Punjab.
In 1999, the government announced a new telecom policy that was more conducive to growth. While Essar was keen on capitalising on the opportunities that the new policy afforded, Swiss PTT was contemplating an exit from its India operations as part of a wider pan-Asia strategy. Essar found a new partner in Hutchison to create a joint venture company that went about consolidating operations and acquiring more telecom circles.
in 2005, when the government came out with the unified licensing scheme, the JV started merging all the telecom circles. By 2006, all the circles were under one umbrella—Hutchison Essar Limited. Essar owned 33% stake in the consolidated entity. Independently, Essar had acquired licenses in seven circles, where Hutchison Essar did not have operations, as well as in four circles of BPL. Essar merged these circles into Hutchison Essar to create a sizeable telecom major.
In 2006, Hutchison, too, decided to exit India. Essar wanted to buy out Hutchison’s stake and tied up a line of credit of over US$11 billion. After a fierce round of bidding that involved several large corporations, Vodafone bought the Hutchison stake, which was valued at US$11.5 billion.
What started out with an initial investment of US$800 million had reached a valuation of US$18.8 billion in just six years. Hutchison Essar’s subscriber base, too, had grown from 1,50,000 to 28 million. Thus Essar was able to build one of the most valuable telecom companies in the world. The time was right for Essar to team up with its new JV partner, Vodafone, to take growth to the next level.
For the next five years, it continued to have a 33% stake in the JV. However, in 2011, Essar decided to monetise its put option and exit the JV to fund a huge $20-billion capital expenditure programme across its core sector businesses, like Steel, Oil & Gas, Power and Ports. By this time, Vodafone-Essar’s subscriber base had grown to over 135 million. Essar received US$5.46 billion from the proceeds of the monetisation, helping it chart a new course in its evolution.
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