Essar hits out at Vodafone

Vodafone-Essar is the third largest telecom service provider with over 124 million subscribers. Vodafone has about 67% stake in the joint venture while Essar owns the rest.

Essar has proposed to merge Essar Telecommunications Holdings Private Limited (ETHPL), which has 11% stake in the joint venture Vodafone-Essar, with another listed firm India Securities Limited (ISL) in order to find fair market value of its stake.

“Vodafone has no locus standi to raise such objections to the merger since it is neither a shareholder nor a creditor of both ETHPL and ISL," ISL said in a filing to the stock exchange.

Vodafone had on Tuesday said that the Essar move could distort the valuation of the joint venture (Vodafone-Essar) and had written to both market regulator Sebi and the Bombay Stock Exchange expressing its concerns and asked for the matter to be examined.

“Vodafone is concerned that the value of India Securities Limited could be misinterpreted as a fair market value of Vodafone Essar,".

Essar has contested Vodafone’s point about misinformation and said the shareholders of ISL have been “well informed about the merger scheme with all details being adequately disclosed vide explanatory statement to the equity shareholders."it had said in a statement.

Essar also said that the company has two put options -- underwritten put option and fair market value put option--for divesting its stake in Vodafone-Essar to Vodafone.

The merger of ETHPL with ISL could give a fair market value of Essar’s stake in the joint venture and the Indian firm may use it while exercising its put option, which is valid till May 2011 as per the agreement between the two partners.

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