Re:Hutch Essar in India

Vodafone Group Plc
11 February 2007


11 February 2007

           VODAFONE AGREES TO ACQUIRE CONTROL OF HUTCH ESSAR IN INDIA           

Vodafone announces today that it has agreed to acquire a controlling interest in
Hutchison Essar Limited ('Hutch Essar'), a leading operator in the fast growing
Indian mobile market, via its subsidiary Vodafone International Holdings B.V.
Vodafone also announces that it has signed a memorandum of understanding ('MOU')
with Bharti Airtel Limited ('Bharti') on infrastructure sharing and that it has
granted an option to a Bharti group company to buy its 5.6% direct interest in
Bharti.

The key highlights are:


Acquisition of a controlling interest in Hutch Essar

*  Vodafone announces it has agreed to acquire companies that control a
   67% interest in Hutch Essar from Hutchison Telecom International Limited
   ('HTIL') for a cash consideration of US$11.1 billion (£5.7 billion)

*  Vodafone will assume net debt of approximately US$2.0 billion (£1.0
   billion) (1)

*  The transaction implies an enterprise value of US$18.8 billion (£9.6
   billion) for Hutch Essar

*  The acquisition meets Vodafone's stated financial investment criteria


Infrastructure sharing MOU with Bharti

*  Whilst Hutch Essar and Bharti will continue to compete independently,
   Vodafone and Bharti have entered into a MOU relating to a comprehensive 
   range of infrastructure sharing options in India between Hutch Essar and 
   Bharti

*  Infrastructure sharing is expected to reduce the total cost of
   delivering telecommunication services, especially in rural areas, 
   enabling both parties to expand network coverage more quickly and to offer 
   more affordable services to a broader base of the Indian population


Local partners

*  The Essar Group ('Essar') currently holds a 33% interest in Hutch
   Essar and Vodafone will make an offer to buy this stake at the equivalent 
   price per share it has agreed with HTIL

*  Vodafone's arrangements with the other existing minority partners will
   result in a shareholder structure post acquisition that meets the  
   requirements of India's foreign ownership rules

(1) Estimated as at 31 January 2007


10% economic interest in Bharti

*  Vodafone has granted a Bharti group company an option, subject to
   completion of the Hutch Essar acquisition, to buy its 5.6% listed direct
   interest in Bharti for US$1.6 billion (£0.8 billion) which compares with the
   acquisition price of US$0.8 billion (£0.5 billion)

*  If the option is not exercised, Vodafone would be able to sell this
   5.6% interest

*  Vodafone will retain its 4.4% indirect interest in Bharti,
   underpinning its ongoing relationship


Commenting on the transaction, Arun Sarin, Chief Executive of Vodafone, said:

'We are delighted to be deepening our involvement in the Indian mobile market
with the full range of Vodafone's products, services and brand. This
announcement is clear evidence of how we are executing our strategy of
developing our presence in emerging markets. We have concluded this transaction
within our stated financial investment criteria and we are confident that this
will prove to be an excellent investment for our shareholders. Hutch Essar is an
impressive, well run company that will fit well into the Vodafone Group.'

Sir John Bond, Chairman of Vodafone, said:

'India is destined to become one of the largest and most important mobile
markets in the world and this acquisition will enable our shareholders to
benefit from our increased investment in this market. We also look forward to
playing our part in delivering the significant economic and social benefits
which mobile telephony can bring to the people of India.'


Principal benefits

The principal benefits to Vodafone of the transaction are:

*  Accelerates Vodafone's move to a controlling position in a leading
   operator in the attractive and fast growing Indian mobile market

   -  India is the world's 2nd most populated country with over 1.1 billion
      inhabitants

   -  India is the fastest growing major mobile market in the world, with
      around 6.5 million monthly net adds in the last quarter

   -  India benefits from strong economic fundamentals with expected real GDP
      growth in high single digits

*  Hutch Essar delivers a strong existing platform in India

   -  nationwide presence with recent expansion to 22 out of 23 licence areas
      ('circles')

   -  23.3 million customers as at 31 December 2006, equivalent to a 16.4%
      nationwide market share

   -  year-on-year revenue growth of 51% and an EBITDA margin of 33% in the
      six months to 30 June 2006

   -  experienced and highly respected management team

*  Driving additional value in Hutch Essar

   -  accelerated network investment driving penetration and market share
      growth

   -  infrastructure sharing MOU with Bharti plans to reduce substantially
      network opex and capex

   -  potential for Hutch Essar to bring Vodafone's innovative products and
      services to the Indian market, including Vodafone's focus on total 
      communication solutions for customers

   -  Vodafone and Hutch Essar both expected to benefit from increased
      purchasing power and the sharing of best practices

*  Increases Vodafone's presence in higher growth emerging markets

   -  proportion of Group statutory EBITDA from the EMAPA region expected to
      increase from below 20% in the financial year ending 31 March 2007 
      (FY2007) to over a third by FY2012


Operational plan for Hutch Essar

Vodafone will execute an operational plan to build on the strengths of Hutch
Essar in order to capture the Indian telecom growth opportunity.


Key strategic objectives

In the context of penetration that is expected to exceed 40% by FY2012, Vodafone
is targeting a 20-25% market share within the same timeframe. The operational
plan focuses on the following objectives:

*  Expanding distribution and network coverage

*  Lowering the total cost of network ownership

*  Growing market share

*  Driving a customer focused approach


Site sharing

The MOU outlines a process for achieving a more extensive level of site sharing
and covers both new and existing sites. Around one third of Hutch Essar's
current sites are already shared with other Indian mobile operators and Vodafone
is planning that around two thirds of total sites will be shared in the longer
term.

The MOU recognises the potential for achieving further efficiencies by sharing
infrastructure with other mobile operators in India.

The MOU envisages the potential, subject to regulatory approval and commercial
development, to extend the agreement to sharing of active infrastructure such as
radio access network and access transmission.


Financial assumptions

As part of the operational plan, Vodafone expects to increase capital
investment, particularly in the first two to three years, with capex as a
percentage of revenues reducing to the low teens by FY2012. The operational plan
results in an FY2007-12 EBITDA CAGR percentage around the mid-30s. Cash tax
rates of 11-14% for FY2008-12 are expected due to various tax incentives and
will trend towards approximately 30-34% in the long term.

As a result of this operational plan, the transaction meets Vodafone's stated
financial investment criteria, with a ROIC exceeding the local risk adjusted
cost of capital in the fifth year and an IRR of around 14%.


Financial impact on Vodafone

The transaction enhances Vodafone's growth profile on a pro forma statutory
basis, with Vodafone's revenue and EBITDA CAGR increasing by around one and a
half percentage points over the three year period to 31 March 2010.

The transaction is expected to be broadly neutral to adjusted earnings per share
in the first year post acquisition and accretive thereafter excluding the impact
of intangible asset amortisation for the transaction. Including this impact, the
transaction is expected to be approximately seven percent dilutive to adjusted
earnings per share in the first year post acquisition and neutral by the fifth
year. (2)

The Board remains committed to its longer term targeted dividend payout of 60%
of adjusted earnings per share. Furthermore, the Board expects the dividend per
share to be at least maintained in the short term.

The acquisition of HTIL's controlling interest in Hutch Essar will be financed
through debt and existing cash reserves and Vodafone expects pro forma net debt
of around £22.8-23.3 billion (3) at 31 March 2007 as a result of this 
transaction.


Further transaction details

The transaction is expected to close in the second quarter of calendar year 2007
and is conditional on Indian regulatory approval.

HTIL's existing partners, who between them hold a 15% interest in Hutch Essar,
have agreed to retain their holdings and become partners with Vodafone.
Vodafone's interest will be 52% following completion and Vodafone will exercise
full operational control over the business. If Essar decides to accept
Vodafone's offer, these local minority partners between them will increase their
combined interest in Hutch Essar to 26%.

In the event that the Bharti group company exercises its option over Vodafone's
5.6% direct interest in Bharti, consideration will be received up to 18 months
after completion of the Hutch Essar acquisition.

Vodafone will continue to hold its 26% interest in Bharti Infotel Private
Limited ('BIPL'), which is equivalent to an indirect 4.4% economic interest in
Bharti. Vodafone will now account for its entire interest as an investment.

UBS Investment Bank acted as financial adviser to Vodafone.

(2) Including the estimated effect of acquired intangible asset amortisation of
approximately £0.3-0.4 billion per annum initially, reducing to £0.25-0.35
billion as shorter lived assets become fully amortised

(3) Assuming closing of the transaction on 31 March 2007, no proceeds from the
sale of the 5.6% listed direct interest in Bharti and no material movement in
foreign exchange since September 2006

 
                                     -ends-                                     

For further information:

Vodafone Group

Investor Relations                         Media Relations
Telephone: [phone]            Telephone: [phone]


Notes to Editors

About Vodafone

Vodafone is the world's leading international mobile communications group with
operations in 25 countries across five continents and over 200 million
proportionate customers by the end of January 2007, as well as 36 partner
networks. For further information, please visit www.vodafone.com

About Hutch Essar

Hutch Essar is a leading Indian telecommunications mobile operator with 23.3
million customers at 31 December 2006, representing a 16.4% national market
share. Hutch Essar operates in 16 circles and has licences in an additional six
circles. In the year to 31 December 2005, Hutch Essar reported revenue of
US$1,282 million, EBITDA of US$415 million, and operating profit of US$313
million. In the six months to 30 June 2006, Hutch Essar reported revenue of
US$908 million, EBITDA of US$297 million, and operating profit of US$226
million.

Up until January 2006, Hutch Essar had licences in 13 circles, of which nine
have 900 MHz spectrum. In January 2006, Hutch Essar acquired BPL, thereby adding
three circles, each operating with 900 MHz spectrum. In October 2006, Hutch
Essar acquired Spacetel, adding six further licences, with operations planned to
be launched during 2007.

The results of Hutch Essar are prepared in accordance with Hong Kong Financial
Reporting Standards which may differ in material respects from the accounting
principles applied by Vodafone.


Important information

For illustrative purposes an exchange rate of £1:US$1.95 has been used.

All company data relating to Hutch Essar is based on Hutch Essar information.
Financial information for the year to 31 December 2005 and half year to 30 June
2006 has been translated using an exchange rate of US$1:HK$7.8.

Vodafone's expected pro forma net debt at 31 March 2007 is calculated by
reference to net debt at 30 September 2006 of £20.2 billion, and adjusting for
cash flows since that date, consisting of £1.2 billion of interim dividend
payments, net cash impact of other acquisitions and disposals of £3.1 billion,
net debt impact as a result of the Hutch Essar acquisition of £6.7 billion and
free cash flow during H2 FY2007 of £1.7-2.2 billion (derived by reference to
FY2007 guidance of £4.7-5.2 billion and H1 FY2007 FCF of £3.0 billion).

Market data is based on information from the Cellular Operator Association of
India ('COAI') and the Association of Unified Telecom Service Providers of India
('AUSPI').

ROIC is defined as return on invested capital, calculated as unlevered free cash
flow divided by the acquisition enterprise value.

Enterprise value calculation
                                                         US$bn      £bn(7)   
-------------------------------------------------------------------------  
Hutch Essar 100% Enterprise Value                        18.80     9.64     
Hutch Essar 100% Net Debt (4)                            (1.33)   (0.68)   
Hutch Essar 100% Equity Value                            17.47     8.96     
Hutch Essar 67% Equity Value (5)                         11.70     6.00     
Holdco Net Debt(4),(6)                                   (0.63)   (0.32)   
-------------------------------------------------------------------------  
Consideration paid by Vodafone to acquire 67% of Hutch
  Essar                                                  11.08     5.68        
-------------------------------------------------------------------------     

-------------------------------------------------------------------------  
Hutch Essar Net Debt (4)                                  1.33     0.68     
Holdco Net Debt (4)                                       0.63     0.32     
-------------------------------------------------------------------------  
Vodafone assumed Net Debt                                 1.96     1.00    
-------------------------------------------------------------------------  

(4) Estimated as at 31 January 2007
(5) Vodafone economic interest of 66.4% with remaining economic interests 
    held by local partners
(6) Holdco refers to holding companies of HTIL owning shares in Hutch Essar
(7) Using an exchange rate of £1:US$1.95 for illustrative purposes


Other matters

This press release does not constitute, or form part of, any offer or invitation
to sell, or any solicitation of any offer to purchase any security in any
jurisdiction, nor shall it (or any part of it) or the fact of its distribution
form the basis of, or be relied on in connection with, any contract thereafter.

Information in this press release about the yield on shares cannot be relied
upon as a guide to future performance.


Cautionary statement regarding forward - looking statements

This press release contains certain 'forward-looking statements' within the
meaning of the Private Securities Litigation Reform Act of 1995 with respect to
our expectations and plans, strategy, management's objectives, future
performance, costs, revenues, earnings and other trend information, including
statements relating to expected benefits associated with the transactions
contemplated herein, plans with respect to these transactions, and expectations
with respect to long-term shareholder value growth and the actions of credit
rating agencies. Forward-looking statements are sometimes, but not always,
identified by their use of a date in the future or such words as 'anticipates',
'aims', 'due', 'could', 'may', 'should', 'will', 'expects', 'believes',
'intends', 'plans', 'targets', 'goal' or 'estimates'.  By their nature,
forward-looking statements are inherently predictive, speculative and involve
risk and uncertainty because they relate to events and depend on circumstances
that will occur in the future.

There are a number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these forward-looking
statements. These factors include, but are not limited to: regulatory approvals
that may require acceptance of conditions with potential adverse impacts; risk
involving our ability to realise expected benefits associated with
the transactions referred to herein; the ability to formalise, on mutually
acceptable terms and conditions, the arrangements with Bharti  relating to
infrastructure sharing; the impact of legal or other proceedings; the risk that
ARPUs may decline or may decline more dramatically than expected; the risk that
credit rating agencies downgrade or give other negative guidance with respect to
our debt securities which may increase our financing costs; and the risk that,
upon completion of the acquisition of the controlling interest in Hutch Essar,
we discover additional information relating to its business leading to
restructuring charges or write-offs or with other negative implications.

In addition to the factors noted above, please refer to documents Vodafone Group
Plc has filed with, or otherwise furnished to, the US Securities and Exchange
Commission (the 'SEC') under the US Securities Exchange Act of 1934, including
the Annual Report on Form 20-F for the year ended 31 March 2006 and subsequently
furnished Form 6-Ks (which are available at the SEC's Internet site (http://
www.sec.gov), for additional factors, risks and uncertainties that could cause
actual results and developments to differ materially from the expectations
disclosed or implied within the forward-looking statements made herein. No
assurances can be given that the forward-looking statements in this release will
be realised. All written or oral forward-looking statements attributable to
Vodafone Group Plc, any members of Vodafone Group or persons acting on our
behalf are expressly qualified in their entirety by the factors referred to
above. Vodafone Group Plc does not undertake, and specifically disclaims, any
obligation to update or revise these forward-looking statements, whether as a
result of new information, future developments or otherwise.

 

 




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