Vodafone pays $5 billion for bigger stake in India

Global telecoms operator Vodafone has just announced a $5 billion investment in India – by buying out the stake it shared with the Essar Group in their joint-venture mobile operator, Vodafone Essar.

Essar Group is a really, really big corporation – it’s headquartered in Mumbai, and has a lot of interests in a lot of different industries, including steel, energy and shipping. The joint-venture it shared with Vodafone in India is one of the biggest telecoms operators in the country. It’s not the only mobile company that Essar has developed (there are companies in Africa and South Asia as well), but it’s certainly the biggest.

What’s the deal?

Essar decided it wanted out of Vodafone Essar – and by the terms of the deal with its partner, Vodafone was offered first grab at the shares. Perhaps envisioning a new company (just called “Vodafone”), the company bought as many of them as it was allowed. For that $5 billion, Vodafone has pushed its ownership of the network to 75% – though as SFGate points out, that’s 1% above the legal limit – the Indian government has placed a cap of 74% foreign ownership in any mobile operator in the country. So Vodafone will have to find someone to sell that 1% to.

What we think?

The value of mobile networks in India is a complete mess at the moment. A massive scandal surrounding the pricing of operation licenses has been causing political chaos. Not only that, but there has been a ludicrously hefty price war going on there for years now – with the value of voice and SMS being driven into the dirt. So it came as no surprise that the main point of contention between Vodafone and Essar here was the valuation of Essar’s side of the business – a point that has caused considerable friction between the two companies in recent months.

About Cian O' Sullivan

Ace reporter, Cian, has moved on from GoMo News. He is currently the office manager for Photocall Ireland - Ireland's premier news and PR photography agency. You can check out the site at www.photocallireland.com. If you want to contact him directly about anything, Cian's new email is cian at photocallireland dot com.
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