NEW DELHI, 16 March 2007 — Vodafone Group PLC and India’s Essar group yesterday reached an agreement to jointly manage a leading Indian mobile phone company in which the British mobile carrier is buying a controlling stake.
Vodafone Chief Executive Arun Sarin and Ravi Ruia, vice chairman of Essar, signed the partnership deal in New Delhi, laying out the details of how both plan to run Hutchison Essar Ltd. — India’s fourth-largest mobile phone company with about 24 million customers.
Britain-based Vodafone won a bid last month to buy a controlling 67 percent stake in Hutchison Essar, a joint venture between Hong Kong-based Hutchison Telecommunications International Ltd. and the Essar group.
The stake that Vodafone, the world’s largest mobile phone company, is buying for $11.1 billion (8.4 billion euros) in cash comprises the 52 percent equity held by Hutchison Telecom and a combined 15 percent stake owned by two individual Indian investors.
The deal with Essar, which holds the remaining 33 percent equity, is important for Vodafone to complete the acquisition because Indian laws do not allow more than 74 percent foreign equity in telecommunications. Vodafone’s bid to acquire Hutchison’s stake is also pending for approval by the government.
Under the deal between Vodafone and Essar, Hutchison Essar will be renamed Vodafone Essar Ltd., the Vodafone statement said. “In due course, that the business will market its products and services under the Vodafone brand,” the statement said, without detailing any timeframe.
Vodafone will take operational control of the company, while Essar’s representation on board of the new company will be proportionate to its shareholding, the statement said. Essar’s Ruia will be appointed chairman to the board of the new company, that also will have Vodafone CEO Sarin as vice chairman.
If the Indian government eases the cap on foreign investment in future, Essar will have the right to sell its stake three years from now to Vodafone for $5 billion or an option to sell between $1 billion and $5 billion worth of shares of the joint venture company to Vodafone at an independently appraised market value.
“Essar has played a key role in transforming this business into a leading Indian mobile operator,” the statement quoted Sarin as saying. “We look forward to leveraging this experience and working with our partner as the company enters its next phase of growth in the attractive Indian telecommunications market.”
