World’s largest telecom operator Vodafone will finally get a foothold in the world’s fastest growing telecom market. The Foreign Investment Promotion Board (FIPB), in a meeting on Friday evening, cleared Vodafone’s application to buy 52% stake in Hutchison Essar.
The FIPB noted that the controversial 15% minority shareholding in the telco is owned by Indians and, hence, the foreign holding in the company will be within the permitted level of 74% after the deal. The deal had run into trouble over the call and put option that Hutchison Telecom International had on the 15% Hutch Essar stake held by Asim Ghosh, Analjit Singh and IDFC.
The options gave the Hong Kong company the right to buy back shares at a fixed value. The deal is now cleared on the condition that the minority shareholders cannot sell their stakes to any foreigner without taking approval of the government.
Vodafone is much larger than its Indian rivals. Vodafone’s 200 million customers pool much bigger than the 121 million strong Indian GSM market. Its 2006 revenues stood at around $58 billion (compare this to $4.5 billion clocked by Bharti in FY07). The group earned EBITDA of over $23 billion last year and has a market capitalisation close to $160 billion.
