No hang up

14 April 2010 By Una Galani Follow @ugalani

The mobile giant can soon be made to buy its Indian JV partner’s onethird stake in local operator Vodafone Essar for $5 bln. Exercising the generous put option would hold shortterm financial logic for Essar. But strategic considerations should persuade it to hang on.

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Essar Group can sell all or part of its 33 percent stake in Vodafone Essar, the country's third largest mobile operator by subscribers, back to its joint venture partner Vodafone for up to $5 billion from May 8 2010.

The Indian conglomerate will have, for a period of one year, an option to sell its entire stake for $5 billion, or an option to sell between $1 billion and $5 billion worth of Vodafone Essar shares to Vodafone at an independently appraised fair market trading value.

Vodafone granted the option to Essar in 2007 as part of the UKlisted mobile operator's acquisition of a 67 percent stake in Hutchison Essar, for which Vodafone paid $10.9 billion in cash, and assumed $2 billion of debt. The operator has since been rebranded Vodafone Essar.

Vodafone had net debt of 31.7 billion pounds ($48.7 billion) as of December 31 2009.

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