Essar’s exit from the Vodafone Essar JV in India has come one step closer with a partial FIPB (Foreign Investment Promotion Board) approval, but further regulatory decisions are still outstanding. India’s FIPB yesterday approved Vodafone’s…
Essar’s exit from the Vodafone Essar JV in India has come one step closer with a partial FIPB (Foreign Investment Promotion Board) approval, but further regulatory decisions are still outstanding.
India’s FIPB yesterday approved Vodafone’s acquisition of a 22% stake in the mobile operator Vodafone Essar that is currently held by the Essar group.
The FIPB is a government body that oversees foreign investment in India. A Vodafone spokesman confirmed the news to TelecomFinance after an announcement by the FIPB yesterday.
Yet in the latest twist to Essar’s exit from the Vodafone Essar JV, the authorities deferred a decision on whether to allow the sale of a separate part of Essar’s interest in the company.
The part of the deal that has been approved involves a stake that is held by two off-shore subsidiaries of Essar, based in Mauritius. These would be transferred to Euro Pacific Securities Ltd, an indirect subsidiary of Vodafone International Holdings.
According to a government statement, the FIPB concluded that this part of the deal can be classified as a transaction between one “non-resident” and another.
In effect, this means that this part of the deal is not affected by India’s foreign direct investment (FDI) rules.
“Since the transaction is between NR [non-resident] to NR, there is no foreign equity inflow,” the FIPB said in the statement.
Yet the government body also deferred a decision on a separate Essar stake.
In its statement, it did not give any specific information on this stake, but referred to it as the “[t]ransfer of shares from Resident to NR to carry out the activities relating to Telecommunication.”
This involves the acquisition of a stake that Essar currently holds on-shore in India, which means that the deal classifies as a transaction between a “Resident” and an NR.
In its statement, the FIPB included this amongst a list of other deals that would be deferred. The next meeting of the FIPB will take place on 30 September.
India’s FDI rules mean that a foreign investor can own a maximum of 74% of an Indian telco.
Vodafone announced at the start of July that it had agreed to pay US$5.46bn to acquire Essar’s 33% stake in the JV. Yet once this deal is completed, Vodafone would have been left with a 75% stake in the JV, which put it above the FDI limit.
On 10 August, Vodafone and the Indian pharmaceutical group Piramal Healthcare announced that Piramal had agreed to acquire a 5.5% stake in Vodafone Essar from Essar for US$640m.
Separately, Vodafone announced yesterday that it had agreed a strategic partnership with the Conexus Mobile Alliance, a group of Asian mobile operators that aims to develop international roaming and corporate mobile services.
In a joint statement, Conexus and Vodafone said that the agreement would “significantly expand” the British mobile operator’s market presence in Asia.
“Together, Vodafone and Conexus will provide customers with enhanced network coverage, harmonised roaming rates across multiple countries and greater cost efficiencies,” they said.
It would involve partnerships between Vodafone and various Asian mobile operators, including the Japan-based NTT Docomo, Hong Kong’s Hutchison Telecom and Thailand’s TrueMove.
