Essar statement puts pressure on Vodafone

Essar Group said yesterday that it had no intention of selling out of Hutchison Essar, its Indian joint venture, stepping up …

Essar Group said yesterday that it had no intention of selling out of Hutchison Essar, its Indian joint venture, stepping up pressure on Vodafone, the UK mobile operator, to come up with a workable shareholder arrangement with the company which is likely to become its partner in India.

The Indian conglomerate, which owns 33 per cent of the joint venture, was also keeping its options open on whether to exercise a claimed first right of refusal over the majority stake held by Hutchison International Telecommunications (HTIL), people close to the deal said.

"Essar is a founding shareholder of Hutchison Essar and the group sees telecoms as a core part of its business portfolio for the long term. It is Hutchison that is selling its shares; Essar has no intention to exit the company," Essar said in a statement last night.

Vodafone, the world's largest mobile operator, won a closely-fought four-way contest last weekend for the 67 per cent stake held by Hong Kong's HTIL in a deal valuing the company at $19 billion. But until yesterday it was not clear whether Essar had planned to stay in the joint venture or whether it would be willing to sell its holding in India's fourth-largest mobile company to Vodafone.

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Vodafone will be keen to avoid the fractious relationship which Essar has had with HTIL.

Arun Sarin, Vodafone's chief executive, yesterday visited the Mumbai home of the Ruia family, which controls the Essar group, to discuss a possible future partnership. But Mr Sarin's relationship with Essar has already got off to a rocky start.

Recent moves by Vodafone to negotiate an agreement with Bharti Airtel, the industry leader in India, to share telecoms towers even before its takeover of Hutchison Essar had been concluded have received a frosty reception from Essar.

The Indian group maintains that, under shareholder agreements, it should be consulted on significant operational issues.

Mr Sarin said yesterday that the objective of the talks with the Ruia family was to iron out differences and find an arrangement for running the company. But he said nothing had been decided, including a schedule for the next round of meetings.

"We are talking about partnership in the future, and that is our respective goal, but partnerships take a little while to kind of make sure we understand aspirations and everything else, and we'll work it out in time," Mr Sarin said.