India has approved British giant Vodafone’s acquisition of the shares it does not already own in its Indian unit for US$1.6bn.
Vodafone said it “welcome[s] today’s decision by the Cabinet Committee on Economic Affairs”.
The transaction had…
India has approved British giant Vodafone’s acquisition of the shares it does not already own in its Indian unit for US$1.6bn.
Vodafone said it “welcome[s] today’s decision by the Cabinet Committee on Economic Affairs”.
The transaction had already received the approval of the Foreign Investment Promotion Board (FIPB) in late December.
The British telco currently owns 64.38% of Vodafone India directly, and 84.5% when combined with its indirect holdings. Local conglomerate Piramal Group is the largest minority investor with an 11% stake.
Vodafone first expressed interest in buying out the minority partners in September last year, following the removal of a 74% threshold for foreign investments in telcos.
The operator is the first company to take advantage of the new legislation but it remains unclear whether other telcos may be tempted to follow suit given the ongoing regulatory uncertainties in the country.
Vodafone itself is still embroiled in a US$2.6bn tax dispute with the local authorities.
The British group contests the levy, which is the result of amended tax laws on cross-border transactions. Indian authorities want the telco to pay capital gains tax in relation to its acquisition of a stake in Hutchison Essar, now Vodafone India, back in 2007.
In September, the CEO of Vodafone India, Marten Pieters was quoted as saying that Vodafone was financially strong in the country and wanted scale, but India’s regulatory conditions were not suitable for M&A.
A couple of months later, the government approved new M&A guidelines, which are expected to encourage consolidation. Since then, Vodafone has been linked to two potential acquisitions in the country: Tata Teleservices and Loop Mobile.
Vodafone has a substantial war chest since the sale of its Verizon Wireless stake in the US for US$130bn last year.
Meanwhile, the operator is taking part in the ongoing spectrum auction in India in order to renew some expiring licences.
