It has announced that it will fork out an additional 33 percent stake – that’s $5 billion – in an Indian joint venture after its partner decided it wanted to sell its part in the Indian space.
In an email sent out to shareholders, Vodafone detailed how Essar had decided it wanted to pull out of the venture where it owned a 22 percent share. Vodafone kindly said it would cover its back plus buy an additional 11 percent share. The new purchases, plus the existing share, means Vodafone has a 75 percent stake in the venture.
Vodafone could be practising keeping its enemies close, as earlier this week Essar, founded by billionaires Shashi and Ravi Ruia, was named in the ongoing Indian telecoms scandal and was accused of using subsidery Loop Telecom as a front company to buy its own GSM licences. It is claimed that the company has done this in a bid to set up another mobile network of its own in competition with Vodafone.
However, if Vodafone wants to play fair over in India it may be forced to let go of one percent of its share and sell it to a local company. This is because under Indian rules, foreign companies are only allowed a 74 percent share in a local mobile operator.
The company has a long history of dealings in India. In 2007 it bought a 67 percent stake in Hutchison Essar for $10.7 billion, however, it was none too pleased when just a year and a half of being in the market six new national licences were awarded, giving it extra competition.
We’re sure this new buy will make it a bit happier.