The UK's Vodafone, the world's largest mobile operator by revenue, said today that it would pay $5 billion (Rs22,310 crore) in cash to buy out the Essar Group's one-third stake in their joint venture, bringing an end to their increasingly fractious relationship.
Vodafone, which has faced a host of problems since entering the fiercely competitive Indian market in 2007, will take over Essar's 33 per cent of Vodafone Essar Ltd, giving it direct ownership of 75 per cent of the Indian operator. It will subsequently divest just over 1 per cent of this to stay within the norms.
The move resolves many months of conflict between the companies, as Essar, a conglomerate with interests in steel, power and shipping, has sought to determine the value of its interest and explored the possibility of an initial public offering for its shares.
This year, the two partners quarrelled over Essar's plans to reverse list its stake in the venture by merging some of its shares into India Securities, already a public company - a deal that Vodafone argued would have inflated the value of its stake.
Vodafone is exercising a call option on 11 per cent of the joint venture, and Essar a complementary put for 22 per cent of the shares. The transaction is expected to settle by November, but will not affect Vodafone's recently published net debt figures, the company said.
Vodafone currently has a direct equity interest in 42 per cent of the company, and the Essar deal will give it 75 per cent, Vodafone spokesperson Ben Padovan said in London. The rest is in the hands of entities controlled by Indian partners.