Essar Group Looking to Sell Vodafone Essar Stake
Published on: 1st Jan 1970: 1:33am
India's Essar Group is reported to be planning to float some of its 33 percent stake in Vodafone Essar - it's joint venture with Vodafone. A sale of a 10 percent stake may take place early next year, Bloomberg News reported, citing people close to the matter. A ten percent stake is estimated to be worth at least US$855 million.
Last year, it was reported that the Essar Group moved a 10.97% stake from its telecom arm Essar Teleholdings to a newly-created firm ETHL Communications Holdings. At the time it was thought that the intention to use the stake as collateral for fund raising purposes
Essar has an existing option that enables it to force Vodafone to buy its entire stake for US$5 billion - or it can sell its stake in parts either to a trade investor or through a stock market floatation. The option for the sale opened in May and runs for one year.
Vodafone paid US$10.7 billion for its 66% stake in the company back in 2007. Since then it has been fighting a US$2 billion tax bill from the government, and also wrote down the value of its stake by US$3.3 billion in May. The company also paid US$2.48 billion for 3G licenses in the country's recent auction.
The Ruias of the Essar group also own Mumbai based Loop Mobile (formerly BPL Mobile). As part of Vodafone's move into the Indian market, the company agreed to buy BPL Mobile from the Ruias of the Essar Group and merge it with Vodafone Essar.
The Ruias originally brought BPL Mobile on behalf of Hutch in 2005, but then refused to transfer the ownership, citing lack of regulatory permission for the merger of BPL with Hutch (now Vodafone Essar) after their agreement ended in August 2006.
It has been long suspected that they want to hold onto BPL Mobile and use its licenses to build up another telecoms operator. Vodafone is known to has sought legal advice over the firms' plans to build a national wireless local loop operator though licenses held through an unrelated company, which just happens to also be called Loop Telecom. The rebranding of BPL Mobile as Loop Mobile last year raised speculation that Essar Group is proceeding with its national network plans.
Reducing its holding in Vodafone Essar would open the way for the Essar Group to push ahead with its own network plans.
On the web: Bloomberg News