Can Vodafone work with Essar?

19 Feb 2007

Vodafone should try to buy the Essar group out of Hutchison Essar, India’s fourth-largest mobile operator, because the Mumbai-based conglomerate has been a ‘troublesome’ partner. So says Egyptian telecoms entrepreneur Naguib Sawiris, whose Orascom Telecom is a minority shareholder in Hutchison Telecom International Limited (HTIL), the company that is selling Vodafone a controlling stake in Hutchison Essar. Hutchison Whampoa and Orascom own 49.7% and 19.3% respectively of HTIL, which last week agreed to sell a 67% stake in Hutchison Essar to Vodafone for USD11.1 billion. Essar owns the remaining 33%. HTIL and Essar clashed when Orascom bought its stake in HTIL in 2005, because Essar said it had a right of first refusal over any transaction affecting the ownership of Hutchison Essar. They are also at loggerheads over Essar’s decision last year to drop its planned sale of BPL Mumbai Communications, a mobile operator in India’s financial capital, to Hutchison Essar.

Arun Sarin, Vodafone’s chief executive, said last week the UK group’s preference was for Essar to be its partner, although it would also offer to buy its stake. In an interview with the Financial Times, Mr Sawiris said: ‘If I was in his [Mr Sarin’s] position – he is stuck with them as partners anyhow – if I could have the choice between keeping them or buying them out, I would buy them out.’ Last week, Essar said it had ‘no intention’ of selling its stake in Hutchison Essar, and held talks with Vodafone.

India, Hutchison Essar Telecom, Vodafone Group, Vodafone India