The Financial Times is reporting that the dispute between Vodafone and its Indian partner Essar is intensifying after the UK-based company won an order blocking the sale of shares in Essar unit BPL Mobile. An arbitration panel has ordered the Essar group to freeze the sale of any shares of BPL, including those of one of its most important subsidiaries, Loop Telecom. The move comes as a result of the dispute inherited by Vodafone when it bought a 67% stake in Hutchison Essar in May 2007. Hutchison had agreed to buy BPL from Essar in July 2005 for USD1 billion, but the deal ran into trouble when Essar claimed a deadline for regulatory approval for the sale had been missed; when the operators could not agree a solution, the dispute moved into arbitration.
Recent reports hint that Norwegian company Telenor has expressed an interest in acquiring Loop, which holds a pan-India GSM licence, with an estimated USD2.5 billion price tag supposedly attached to the cellco. While the arbitration order is expected to impede any sale, Loop is reportedly still free to entertain interest from strategic investors using means other than the direct sale of existing shares; investors could enter Loop through the issue of new equity.