Vodafone, Essar finally shake hands
Mar 15, 2007 - 6:39:16 PM
New Delhi, March 15 - Setting aside initial differences, Vodafone and Essar Thursday formally announced their partnership of acquiring a controlling stake in India's fourth largest mobile firm Hutch-Essar.
In the new entity, which has been named Vodafone Essar, Vodafone will own a 52 percent stake, while the Essars will continue to hold 33 percent. Analjit Singh of Max Healthcare and Asim Ghosh, the CEO of Hutch-Essar, will control the remaining 15 percent.
While Essar's vice-chairman Ravi Ruia will command the post of chairman in the new joint venture, Vodafone's India-born CEO Arun Sarin will be appointed vice-chairman.
Vodafone, which will have operational control in the partnership, will have six directors in the board and Essar will have four.
The main contentious issue was Vodafone signing a memorandum of understanding - with rival Bharti-Airtel on sharing infrastructure that was not favoured by the Essars.
However, it seems both parties have reached an agreement on that as well.
'An MoU is a statement of intent and not a legal document. Our main aim is to reach rural India,' Sarin told reporters.
Reiterating that the main objective of Vodafone will be to become number one in India by 2010, Sarin said: 'Our target is to achieve 20-25 percent market share in the coming years from the current 16-18 percent.'
Ruia said: 'Together, we expect to change the Indian mobile landscape and we look forward to working with Arun.'
As agreed, Essar will have liquidity rights in the third and fourth year of the partnership - which means the firm will have an option to sell its 33 percent shareholding in Vodafone Essar to Vodafone for $5 billion or an option to sell between $1 billion and $5 billion worth of Vodafone Essar shares to Vodafone at an independently appraised fair market trading value.
Earlier this month, the Foreign Investment Promotion Board - had sought details from the British telecom giant of the proposal to acquire controlling stake in Hutch-Essar and also about its telecom investment plans in India.
Sarin said: 'The FIPB process is an independent one. We have provided them all the necessary documents.'
On asked the company's stand if FIPB does not clear the joint venture, added Ruia: 'We have to see what happens.'
Emphasising Vodafone's focus in rolling networks in rural India, Sarin said: 'We are likely to invest several billion dollars in networks in India. There's an unmet need in rural India -.'
Earlier, both Sarin and Ruia met Communications and Information Technology Minister Dayanidhi Maran to apprise him of the deal.
Maran said: 'Vodafone's entry into the Indian market will bring in more professionalism and value in the national telecom sector because of their global experience.'
'They will spur more competition in the Indian market and customers will get more benefits,' he added.
Last month, Vodafone had clinched a deal to acquire Honk Kong-based Hutchison Telecom International's Indian operations for $11.1 billion in cash and $2 billion in debt assumptions.
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