Vodafone-Essar mobile phone dispute deepens

MUMBAI: Differences between Vodafone and Essar, its Indian partner has reportedly deepened after the former won an order blocking the sale of shares of a mobile phone unit controlled by the Essar Group.

According to the London-based Financial Times, an arbitration panel has ordered Essar to freeze the sale of any shares of the mobile unit, BPL Mobile Communications, including those of one of its most important subsidiaries, Loop Telecom.

The order has imposed significant constraints on the ability of BPL and Loop to dispose of their assets pending the arbitration outcome.

Loop, which holds 21 mobile phone network licences, has been touted for sale at a price tag of up to 2.5 billion dollars.

The arbitration order could stop the Loop sale but a person familiar with the issue said Loop could still bring in strategic investment using means other than the direct sale of existing shares.

Vodafone's partnership with Essar began last year when it bought a controlling 67 per cent stake in Hutchison Essar, the country's number three mobile operator, from Hong Kong conglomerate Hutchison for 11 billion dollars.

Essar, controlled by the Ruia family, retained a 33 per cent stake in the joint venture, which was renamed Vodafone Essar, after a period of intense negotiations over the terms and conditions of the partnership with the UK group's former chief executive officer Arun Sarin.



As part of the deal, Vodafone inherited a dispute between Hutchison and Essar over the ownership of BPL Mobile Communications, a small mobile phone company with operations in Mumbai and about one million subscribers.

Hutchison had agreed to buy the company from Essar more than two years ago for 400 million dollars.

The deal ran into trouble after the Indian group claimed its Hong Kong partner had missed a deadline for obtaining regulatory approval for the sale. When the sides could not agree a solution, the dispute moved into arbitration.