Indian regulators last night gave Vodafone permission to take a 52 per cent stake in Hutchison Essar, the country's fourth-largest mobile operator.
However, India's foreign investment promotion board insisted that Vodafone would need to seek further approval to exercise options over a 15 per cent minority stake in Hutchison Essar held by two Indian businessmen and a finance company.
Regulatory uncertainty has surrounded Vodafone's Indian deal since it announced in February that it had "agreed to acquire companies that control a 67 per cent interest in Hutch Essar" for $11.1 billion (€8.1 billion) from Hutchison Telecommunications International, a unit of billionaire Li Ka-shing's Hutchison Whampoa. Vodafone said last night: "It is good news that it seems the FIPB has recommended approval of the transaction."
Regulators were concerned that Hutchison Essar's shareholder structure breached India's foreign direct investment laws, which limit non-Indian ownership of telecommunications companies to a maximum of 74 per cent. The regulators were anxious to avoid setting a precedent for Vodafone which would undermine the rules in other sectors.
The problem arose for Vodafone as Essar, an Indian conglomerate which owns the remaining 33 per cent stake in Hutchison Essar, had arranged its interest so that 22 per cent was held through offshore companies and therefore counted towards the 74 per cent ceiling.
Observers said that the FIPB's decision was an attempt to resolve divisions between a finance ministry concerned that the deal set a precedent and a commerce ministry keen to claim credit for rising inward investment. - (Financial Times Service)
