The Ruias, the promoters of the oil-to-telecomEssar Group, are in no mood to sell their 33% stake in the country’s fourth-largest mobile phone services company, Hutchison Essar to new majority owner Vodafone Group.
“Clearly, selling is not the intention,” an industry source said, on the condition of anonymity. The decision of the Ruias was confirmed by investment bankers.
Vodafone, the world’s largest mobile phone company by revenues, has offered the Ruias—brothers Shashi and Ravi are chairman and vice-chairman respectively of the group—the same valuation at which it bought out the 67% stake that Hong Kong’sHutchison Telecommunication International Ltd or HTIL held in the Mumbai-based target.
The industry insider said Essar was looking at various options to protect its investment in Hutchison Essar. “One of them is a put option,” the source said. “They (the Ruias) will be comfortable with one.” A put option sets the price, guaranteed by the majority shareholder, at which an investor can sell at a later date.
The Ruias complain that they have not received a formal communication from HTIL or Vodafone on Sunday’s deal. “Essar is waiting for a formal proposal from Vodafone on the partnership,” said a company source. At the price Vodafone bought out HTIL, the Essar Group’s 33% stake is worth over $6.2 billion (Rs26,488 crore), including debt.
The Times reported in London on Tuesday that the Ruias are unhappy with Vodafone for getting into a infrastructure-sharing agreement with competitor Bharti Airtel without consulting them.
Essar, which was also one of the bidders for the two-thirds stake owned by HTIL in Hutchison Essar, earlier claimed that it had the right to be first offered the Hong Kong partner’s stake.
Vodafone chief executive Arun Sarin said in New Delhi that the company’s lawyers had advised him that the right of first refusal did not apply to the HTIL-Vodafone deal. Sarin will meet the Ruias in Mumbai on this visit, sources said.
One of the options that the Ruias and Sarin will discuss, sources said, is merging BPL Mobile, an operator in Mumbai with over a million customers, into Hutchison Essar. The BPL business, bought out in July 2005, is currently controlled by the Ruias and valued at over $700 million. If BPL mobile is merged into Hutchison Essar, the Ruias will get a small additional stake.