The company will be renamed Vodafone Essar and, in due course, will market its products and services under the Vodafone brand.
They have also settled a break-up deal under which Essar will have an option, between the third and fourth anniversaries of completion of the deal, to sell its 33% shareholding in the company to Vodafone for $5bn. Alternatively, it can sell between $1bn and $5bn of Vodafone Essar shares to Vodafone at an independently appraised fair market trading value.
With penetration levels in the Indian marker of around 13%, the two companies believe that there are substantial growth opportunities in the market. Vodafone boasts that it can contribute an extensive range of products and services, many of which are not currently available in India. For its part, Essar is a major industrial group that has a deep understanding of India and the mobile telecommunications industry there.
By putting these complementary strengths together, the two companies plan to broaden Vodafone Essar’s service offering and enable it to become the leader in the Indian mobile telephony market.
Vodafone paid Hutchison Telecommunications International $11.1bn for its 67% stake in the company and to smooth the path to Essar backing the deal paid it $373.5m to take all reasonable steps to ensure completion of the transaction. It will also pay it further $41.5m not later the second anniversary of the deal.
