Hutchison pays $415 mn to Essar for smooth exit

Hutchison Telecom of Hong Kong, which sold the majority stake in Hutchison Essar to UK giant Vodafone, today said it would pay the Essar group over $415 million (Rs 1,865 crore) to ensure its smooth exit.

Hutchison Telecom of Hong Kong, which sold the majority stake in Hutchison Essar to UK giant Vodafone, today said it would pay the Essar group over $415 million (Rs 1,865 crore) to ensure its smooth exit.

Under the settlement agreement, Essar would take all steps to ensure completion of the transaction and would refrain from initiating any action that may inhibit or delay the transaction, HTIL said in a statement. Officials of Essar, which has been consistently maintaining that it has the Right of First Refusal, could not be contacted for comments. As part of the settlement, Essar would give HTIL certain indemnities

and waive any rights it may have in relation to the transaction.

In its statement, issued in Hong Kong, HTIL said it has reached a settlement agreement with Essar Group in connection with the proposed sale of its entire stake in Hutch-Essar to British mobile giant Vodafone. The announcement coincided with the joint press conference of Vodafone CEO Arun Sarin and Essar vice chairman Ravi Ruia to announce an agreement to jointly manage the Indian JV.

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HTIL in turn has agreed to pay Essar $373.5 million at the closing of the transaction with Vodafone and a further $41.5 million and interest on the occurrence of certain events till the second anniversary.

HTIL had on February 12 announced that it proposed to dispose interests in Hutchison Essar for $11.1 billion.It had received its shareholders’ approval for the transaction at an Extraordinary General Meeting on March 9 and expects the completion of the transaction during the second quarter of 2007.

Meanwhile, Vodafone and Essar have reached an agreement on the terms of a partnership deal for Hutchison Essar which has been rechristened Vodafone Essar in view of the former acquiring a controlling stake in the company.

At a joint press conference addressed by Sarin and Ruia, the new collaborators reiterated their ambition to emerge as the number one player in the Indian telecommunications sector by 2010. “We want to expand our market share from the current 16 per cent to 25 per cent in the next few years. Our thrust would be on enhancing the penetration of mobile telephony into the rural market as we believe that there is a huge unmet potential in the rural parts of the country,” Sarin said.

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Vodafone Essar would invest heavily in expanding its network and be looking for partners for network sharing in rural areas. The company has already signed a memorandum of understanding (MoU) with Bharti Telecom but clarified that it is a statement of intent and not a legally binding agreement. “Network sharing will do away with tower duplication and serve the need to build low cost infrastructure quickly. We are completely open to other players who want to join in our endeavour to reach out to the rural market faster,” Sarin reiterated.