India's Essar Group is reported to have moved part of its 33% stake in Vodafone Essar to a new stand-alone company with the intention to use it as collateral for fund raising purposes. A person privy to the development told the Economic Times that the diversified Essar group has transferred a 10.97% stake from its telecom arm Essar Teleholdings to a newly-created firm ETHL Communications Holdings.
"ETHL, a wholly-owned subsidiary of Essar Teleholdings, was created because it makes due diligence for financing easier. The 11% stake in Vodafone Essar is the only asset in the new company and will be pledged to raise funds," he told the newspaper.
It is estimated that the Essar Group could use the state to raise up to US$1.2 billion - a move which raises further speculation about rumoured plans to build another mobile network in competition to Vodafone.
Another person close to the Essar group said the steel-to-shipping conglomerate had not decided on the specific allocation of funds. "They are expected to use it across businesses, including oil, telecom, shipping and steel," said a banker involved in the discussions.
The Ruias of the Essar group currently 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.
Although the Ruias own 33% of Vodafone Essar and should be prevented from setting up competing companies, it is thought 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 month raised speculation that Essar Group is proceeding with its national network plans.
On the web: Economic Times
Posted to the site on 26th June 2009
Posted to: www.cellular-news.com/story/38234.php