Orange Out; Orascom In

Hutch moved Orange out of their relationship that lasted more than
five years; and sold stake to the Egyptian operator

It was
quite an eventful year for Hutchison India, which consolidated its operations
across the country. The company is trying to put things in place before the
launch of its IPO. The last major development that took place in Hutch was the
end of its half a decade old relationship with the UK's leading service
provider 'Orange', coupled with the new branding exercise that gave the
company a new color. This was followed by the parent company, Hutchison
Telecommunication International's (HTIL) 19.3% stake sale to Egyptian service
provider Orascom for $1.3 bn.

Though many thought
Orange's exit was part of Hutch's consolidation exercise in the country but
with Orascom's entry, it's clear that the company intends to move beyond the
consolidation phase. Although company officials are tight lipped about the
development, it's clear that a complete makeover of the company is on the
anvil before the IPO launch. The brand slogan 'The future is bright, the
future is Orange', that gave Hutch a new identity in the Mumbai circle, has
been replaced by Hutch's slogan 'Wherever you go, our network follows'
with a new color 'pink'.

Orange's exit was an
expected development. Both companies have had trouble on branding initiatives,
and last year Orange sued Hutch in the Delhi High Court for trademark violation
and accused it of intentionally encroaching upon its intellectual rights. Orange
had also accused Hutch of creating images that were entirely based on Orange's
brand guidelines, and had used the same to market the Hutch brand.

Orange is possibly
contemplating entering the Indian market the Vodafone way, and buying stake in
some Indian cellular company to become a competitor for Hutch.

A new name for the
Indian market, Orascom Telecom is the largest operator in Pakistan and
Bangladesh. And since India is emerging as the largest telecom market, all big
operators are eyeing it, and Orascom is no exception. In hutch India, Hutchison
owns 34%, Orascom owns 8%, and Essar and others own 58% stake. Therefore it's
clear that the changes in the board of Hutchison Essar will have a direct impact
on its Indian operations.

And unlike Orange, the
terms and conditions between the two companies, would be different. Hutch would
not use Orascom's brand name in India as Hutch itself is quite a strong brand.
But Orascom will have its say in all policy related matters and decisions.

Orascom is also open
to holding another 3.7% stake in Hutch over a period of one year, which would
further strengthen its position in the company. The stake sale might change the
entire company dynamics. Hutch Essar recently bought BPL and subsequently sold a
minor stake to Orascom. And Orascom's entry would not only be restricted to
having a stake in the company. The company would eventually like to have its own
brand identity in India and could go the 'Orange' way. Both the companies
are also looking at a possible merger.

The exit of Orange
would not pose any major setback for Hutch. The reason being that as per the
agreement between both the companies, Hutch was using only Orange's brand in
Mumbai, Navi Mumbai and Kalyan. The agreement had also authorized Hutch to use
Orange's trademarks, marketing image and other related intellectual property
in the licensed territory.

Though Hutch-Orascom
deal is meant to have synergies between the two in terms of equipment deployment
and IT procurement, it'll have to stand a test of time for Hutch in India.
It's always difficult to live up to the expectations of all the stakeholders,
and at present, for Hutch, it's only stakeholders but the future would be with
shareholders and it's always not possible to have the exit like 'Orange'.

Rahul Gupta

rahulg@cybermedia.co.in