Cash call

New Delhi, June 1 (PTI): UK-based Vodafone today paid $1.9 billion to Essar as the first tranche to buy a 22 per cent stake in their telecom joint venture — Vodafone-Essar.

The 22.03 per cent stake, held by offshore entities of the Ruias-led Essar, is valued at $3.8 billion.

“We have made the first tranche of payment to Essar,” a Vodafone spokesperson said.

Of Essar’s 33 per cent stake in the venture, 22.03 per cent is owned by the company’s overseas entities. The remaining 10.97 per cent is held by the group’s Indian firms and is valued at $1.2 billion.

According to sources, Vodafone has now paid $1.9 billion to Essar and the remaining $1.9 billion will be paid in November.

Essar has approached the Reserve Bank of India for approval to sell the remaining 10.97 per cent in the telecom joint venture.

When contacted, the Essar spokesperson declined to comment.

In March, Vodafone had said it would exercise the option to purchase Essar’s entire 33 per cent stake, valued at $5 billion.

Once the deal is complete, Essar would completely exit from the venture, which offers mobile services in India.

The deal will leave Vodafone with a 75 per cent stake in Vodafone Essar — one percentage point higher than the limit placed on foreign ownership of a telecom company. The UK-based company will have to offload a little over 1 per cent to an Indian investor to meet regulations.

Vodafone had entered the Indian market in 2007 when it bought Hutchison’s stake in the joint venture for over $11 billion.