Vodafone wants 100% control at artificially low value: Essar

Written by: Pti
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New Delhi, Jan 21 (PTI) Ruias-led Essar Group todaylaunched a scathing attack on Vodafone saying that the Britishcompany is trying to gain 100 per cent control of the telecomJV Vodafone-Essar at an "artificially depressed value".

A day after Vodafone complained to market regulator Sebito probe allegations of insider trading in India SecuritiesLimited, a listed company of Essar group, Ruias said theBritish company''s allegations are baseless.

Essar has proposed to merge Essar TelecommicationsHoldings Private Limited (ETHPL), which has 11 per cent stakein Vodafone-Essar, with India Securities Limited in order tofind out Fair Market Value of its stake in the joint venture.

Vodafone-Essar is the third largest telecom operator inIndia with over 124 million mobile subscribers. Vodafone hadbought nearly 67 per cent stake from Hutchison in 2007 whileEssar holds the remaining stake.

"The merger scheme between India Securities Ltd andETHPL is fully compliant with all applicable Indian laws,capital and financial sector regulations," Essar said in astatement.

Vodafone, which has sought to intervene in theproceedings governing the merger scheme in the Madras HighCourt, is neither a shareholder nor a creditor of any of thesecompanies and has no legal capacity to challenge this merger,it said.

Vodafone had objected to the merger saying it woulddistort the valuation of the joint venture.

"It''s (Vodafone�s) objections to the merger aremotivated and factually incorrect. The purpose behind raisingthese objections is to prevent the discovery of the fairmarket value of Vodafone-Essar, as envisaged in the agreementsbetween Vodafone and Essar," Essar said.

Last year when the Essar group wanted to list VodafoneEssar by offering its shares through an Initial Public Offer,Vodafone ensured that the IPO did not go through and no marketvalue could be established, Essar said.

Vodafone, Ruias said, is attempting to force Essar outof joint venture (JV) and own 100 per cent of theVodafone-Essar at an artificially depressed value. The courtprocess is being sought to be abused through the attempt tointervene and file objections.

The fair market value under agreements with Vodafone hasto be determined by three international investment banks. Ifthe market value being discovered by the merger were to bemanipulated and artificial, as Vodafone claims, the investmentbanks would naturally ignore that value when making theirdetermination, Essar said.

"The investment banks are under no obligation to use thelisted value alone. If, on the other hand, as we believe, themarket value being discovered is fair and reasonable thennaturally the banks would take that into account," it added.

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