The Ruias and Vodafone are staying together. Arun Sarin’s meeting with the Ruias at the latter’s South Mumbai residence on Thursday has resulted in measures that would trigger the formation of a new joint venture to manage Hutch.
As a first step, the partners have decided to restructure the existing shareholder’s agreement of Hutch Essar Ltd and the issues related to the merger of BPL Mumbai circle with the joint venture company.
A team comprising top officials of the telecom venture, investment bankers and legal officials will soon be formed to formalise the new partnership structure.
I know Ruias for quite a long time. I respect their partnership. They have created value in the business. We are now trying to iron out issues and will take the business forward together," Sarin said. Sarin with his four-member team came to Ruia’s house at Walkeshwar at around 12 for a two-and-half hour luncheon meeting.
Ruias have also made their intentions clear. Ruling out chances of Essar stepping down from the joint venture, the group vice-chairman Ravi Ruia said, “We are not going to exit the business... we will run it together.”
If Essar wanted to exit, there would have to be further equity restructuring as foreign firms are not allowed to hold more than 74 percent," said a source. "It's hard to predict how the Essars might behave or what they will do, but they really have only two options: cooperate with Vodafone or cash out," said a telecom analyst to a global news agency.
Vodafone reached an $11.1 billion deal on February 11 to buy a controlling stake in Hutchison Essar from Hutchison Telecom International Ltd. The deal is expected to help offset slowing growth in its core European operations. But the Essar Group has long claimed a right of first refusal over any stake sale in Hutchison Essar, raising fears it could resort to litigation to thwart or delay the deal.
Hutch Essar is India’s fourth largest telecom service provider with 24.41 million customers as on January 31 with over 16 per cent market share in the fastest growing Indian telecom market.
Arun Sarin will continue with his lobbying before he goes back to London. He will meet Prime Minister Manmohan Singh and communication minister Dayanidhi Maran before his scheduled departure to London on Friday evening.