Ericsson India acquires minority stake in Novatium

Novatium has a cloud computing, virtualization and PC-as-a-Service where people can simply plug and compute

Market for cloud computing: 

The cloud services market was estimated at $46.4 billion in 2008 — and is expected to increase to $150.1 billion by 2013. The overall compound annual growth rate (CAGR) is forecast to be 26.5 percent

Ericsson gains:

•  Ericsson becomes a prime driver in an all-communicating world, voice, data, images and video to share ideas and information wherever and whenever they want.
• Provide affordable communication for all 
• Get a piece of existing revenue pie: Network providers are supporting bandwidth increases for cloud computing. But the revenue from cloud services still flows chiefly  to cloud service providers, with little if any going to network providers. 
• New revenue opportunities – benefit by switching enterprise-hosted services to private or virtual private clouds (“everything-as-a-service (XaaS) solutions). This approach offers better margins, along with decreased management demands.
• New business opportunity - explore advertising partnerships  
• Growing “service orientation” for new and existing partners
• Economies of scale - using excess capacity in core network 
• Gain partnerships with leading Indian operators - Bharti, BSNL, MTNL and Tata along with successful pilot and deployments in other countries

Vodafone Essar Partnership

Vodafone agreed to adjust the payments that would be made under the fair market value put arrangements with the Essar group.  
This amount has now been calculated as INR 3400 Crore and is payable in the event that the Essar group exercises its put option to sell some or all of its Vodafone Essar Limited shares at fair market value provided that the maximum aggregate amount payable shall not exceed US$5 billion. 
This additional amount is not payable in the event that the Essar group decides to sell its 33% shareholding in Vodafone Essar Limited at the underwritten value of US$5 billion.

History: In 2007, Vodafone had taken a stake of 67% in Essar group with a payment of $10 billion. At that time the put option was to a limit of US$5 billion


Take 1: This option that been put in place to take account of the upfront cost of 3G licences, based on the total price of the licences secured. The total price paid by Vodafone to get licenses to 9 circles was INR 11073.6 Crore. A 33% of this amount puts Essar's stake at INR 3691.2 Crore


Take 2: Due to the payments made for 3G, the company has become highly leveraged and this has resulted in lowering of its value. It would seem that the current value of 33% stake is about $4 billion to $4.2 billion. Essar had shown its reluctance towards the high bids being made by Vodafone for 3G. Clearly, Essar was in it for the short term. Vodafone wanted to be a 3G player if it was to be here for the long haul. This is Vodafone's way of opening the path for Essar to move out.