British telecom giant Vodafone on Friday agreed to pay an additional $400 million (about Rs 1,850 crore) to buy out the Ruias-promoted Essar group’s 33% stake in the telecom joint venture.
The deal is now valued at $5.4 billion instead of the originally announced transaction value of $5 billion.
“Under the agreements signed in Port Louis, Mauritius, Vodaofone has made a net payment of $3.32 billion, after deduction of withholding tax of $0.88 billion,” Essar said in a statement. The withholding has raised the value of the 22% stake to $4.2 billion from the ealier $3.8 billion.
The remaining 11% stake held by Essar through Essar Communications Holdings Ltd will be sold at $ 1.26 billion compared to $1.20 billion decided earlier.
The transfer of shares would be completed after obtaining all necessary approvals expectedly by February 15, 2012.
Income tax department sources said the Vodafone's wholly-owned subsidiary based in Mauritius withdrew tax dispute petition from Authority for Advance Rulings (AAR).
“While Vodafone and ECML continue to believe that no tax is due on this transfer, it was viewed as prudent to deduct and pay withholding tax,” an Essar press statement said.
“We were one of the early entrants in the telecom space in 1995 and we are really pleased that Vodafone-Essar has grown to become one of the premier telecom companies in the country with over 140 million subscribers,” Essar Group Chairman Shashi Ruia said.
Vodafone is contesting a $2.5 billion tax bill in India over its acquisition of a controlling stake in mobile firm Hutchison Essar.
The tax demand relates to the mobile phone company's 2007 purchase of the Indian telephone assets of Hong Kong conglomerate Hutchison Whampoa for $11 billion.
Vodafone Group CFO Andy Halford told HT the transaction was exempt from tax because it took place between two offshore entities.