It is a deal that ends a four-year relationship rigged with controversy and clashes, but Vodafone taking a majority stake in the Indian joint venture finally gives the UK-based operator a 74% majority shareholding in the venture.
Worth $5.46 billion, the price includes an $880 million tax payment to the government, which both Essar and Vodafone believe is not due. If overturned, this payment will be returned back to Essar. Vodafone is not unfamiliar to tax disputes with the Indian government, and is still fighting a $2.5 billion bill over the 67% stake acquisition of Hutchison Essar in 2007.
It is clear to industry experts that Vodafone is aggressively implementing its strategy of only owning assets where it has control, which in turn, led to the Essar deal and the sale of its stake in Polish operator Polkomtel completed last week.
This deal however, has not come as surprise to anyone in the market. The Vodafone brand has proved hugely popular in India, shown by the joint venture’s 140 million subscribers. Indeed, much of the friction between the two companies has stemmed from accusations by Essar that Vodafone has been trying to force it out of the market after it openly declared it take a majority stake in the joint venture in March. The operator gave Essar the option to exit in May for $5 billion, which it rejected, and local media reports Essar is still not entirely satisfied with the price it eventually received.
The remaining 26% in the venture is mainly owned by Indian shareholders.
