Rating agency Fitch said on Friday that British giant Vodafone and domestic telecom major Reliance Communications -- the two front-runners in the race for India's fourth largest mobile player Hutch-Essar, stand to gain the most from a deal.

While mentioning that Friday has been set as the last date for submission of bids by the various suitors, Fitch said a long-drawn bidding war might lead to a much higher aquisition cost for the winner.

• The race for Hutch-Essar

This could also adversely impact the financial profile of the acquirer if substantial dent is incurred to fund the deal, the rating agency said adding the strategic value of Hutch would be most significant for Vodafone and RComm.

It said the competition for Hutch is aggressive and the counter parties are reportedly willing to pay around $20 billion for Hutchison Telecommunications International Limited's 67 per cent stake in Indian mobile venture.

The major contenders include Vodafone, RCL, Essar Group, Egypt's Orascom Telecom and Hinduja Group.

"Hutch will not only be a good fit for Vodafone's portfolio but the robust growth in India could also help offset slowing growth in the group's traditional West-European markets," the agency said.

UK-based Vodafone has an impressive footprint spanning 27 countries but has a limited exposure to Asia, which has some of the fastest growing telecom markets.

Fitch said the merger of RComm and Hutch would radically alter the competitive scenario.

"For Reliance, Hutch is an extremely attractive target from a technology point of view as it has often expressed keenness to strengthen its GSM franchise," Fitch said.

"There are also obvious scale benefits of operational and capital expenditure savings from a potential merger with Hutch," it added.

A successful bid by Indian partner Essar would have a largely neutral impact on market structure and competition, the agency said.

Essar reportedly holds a pre-emptive right of refusal and 'tag-along' rights over HTIL's sale of its stake in Hutch.

From a political standpoint, Egypt's Orascom, who is also in the race for acquiring Hutch, has a weaker position than its rival bidders.

For foreign investors, Hutch represents a high quality asset and a rare opportunity to own a piece of India's compelling growth story, it added.

According to the agency, Indian telecom industry has witnessed a flurry of merger and acquisition activities in the past 12-18 months, but none of the deals so far remotely compares with this proposed sale either in terms of acquisition value, strategic significance or implications for the industry.

A motivating factor for the proposed sale is arguably HTIL's fractious relationship with its partner Essar, "which ultimately stymied plans for Hutch's much anticipated initial public offering targeted for 2006."