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Home / India / Vodafone woos Essar to stay on

Vodafone woos Essar to stay on

Vodafone will offer Essar group a 7% stake at the same price it offered to Hutchison, reports M Rajendran.

india Updated: Feb 14, 2007, 02:44 IST
M Rajendran
M Rajendran

Vodafone’s Indian-born chief executive Arun Sarin said on Tuesday that he was keen to keep Essar as local partner after the world’s number two telecom company that he runs acquired a majority in Hutchison Essar Ltd. He added that he eyed a largely volume-driven business to grow his profits in India, aided by cost-sharing in network infrastructure with arch-rival Bharti Airtel.

Speaking on the sidelines of a seminar at the 3GSM Congress in Barcelona that brings together mobile operators worldwide, Sarin told reporters that Vodafone would make an offer to Essar group in the next two weeks to pick up a seven per cent stake that would be at the same price that it offered to Hutchison Telecommunications International Ltd (HTIL).

But the Ruias who control Essar are not biting the bait yet, and are eyeing more money or power or both in the joint venture that they helped nurture for Hong Kong tycoon Li Ka-shing, who sold HTIL’s stakes in the JV to Vodafone. “We will make a similar offer to Essar to pick up their stake. It would be identical in terms of the price that we made to HTIL.  It would be for them to decide if they would like stay with us and grow with us or liquidate the stake. My great hope is that they will stay with us as partners and help build this company. But, it is their choice," Sarin said.

Sarin was due to be in Delhi on Wednesday and is expected to iron out the formalities before making the offer.

"I would like to have local Indian partners in this kind of a situation," he said, possibly with an eye on regulatory issues that often involve regulatory details and government relations best handled by local partners.

The current foreign direct investment norms in telecom sector allow foreign company to hold stake upto 74 per cent. While HTIL effectively controlled 67 per cent, not all of it is foreign equity.

Sarin said Vodafone was open to making more acquisitions in India, but the current priority was to digest the Hutch buyout.

“Our assessment about the Indian market is not to enhance the average revenue per user (ARPU). Our view is the increase should come in penetration. Currently we are at 13 per cent and in 4-5 years we would be benefited by 45 per cent — that is like 500 million subscribers,” Sarin said, adding sharing of networks with Bharti would help reduce costs.

Sarin said Asim Ghosh, the current Indian CEO of Hutch, will stay with his team and he would like to see them expand services into rural areas and offer more value-added services and low cost handsets. 

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