Vodafone wins Hutch Essar auction with $ 19 bln bid

BARCELONA, Feb 11 (Reuters) Vodafone Group Plc has won the battle for a controlling stake in Hutchison Essar, India's No. 4 mobile operator, with a bid that values it at around billion including debt, a source and India's Essar group said on Sunday.

A source close to the matter told Reuters that Vodafone had trumped India's Reliance Communications and Hinduja group, as well as Essar itself, in the race for the 67 percent stake being sold by Hong Kong-based Hutchison Telecommunications International Ltd..

The deal will give the British group, the world's biggest mobile operator in terms of subscribers outside of China, the opportunity to bring its brand into the world's fastest-growing and second-biggest mobile market.

The Essar Group, which owns 33 percent of Hutch Essar and had also been bidding, said it was evaluating a proposal from Vodafone to stay on as its partner.

'' billion shows just what value has been created ...Vodafone has invited us to be its partner in Hutchison Essar, an offer we are evaluating,'' Essar group Vice Chairman Ravi Ruia said in a statement.

Vodafone, which as a foreign company is barred by Indian law from owning more than 74 percent of a local telecoms operator, declined to comment whether it had won the auction. Hutchison was not immediately available for comment.

Prabal Banerjee, chief finance officer for the Hinduja group, told an Indian television channel that Vodafone had offered a ''top-notch value'' for the business.

''We were never agreeable for a price that was not backed by fundamentals. I'm sure Essar and Vodafone will tie up pretty well and create much more valuation for the organisation,'' Banerjee said.

A spokesman for Reliance Communications declined to comment.

CRUCIAL MOVE The deal is a crucial move by Vodafone Chief Executive Arun Sarin, who is under pressure to expand the business amid slowing growth in Vodafone's core European markets, while at the same time not overpay for acquisitions.

Sarin, who was born in India, last month vowed not to pay ''over the top'' in the Indian bidding and said Vodafone would adhere to its strict internal acquisition criteria in its chase for the Hutch Essar majority stake.

Early reactions from analysts, some of whom had braced for bids as high as billion, were positive. They are looking forward to cost savings through sharing telecom networks between Indian operators and Vodafone cashing in on other Indian investments.

''It is now important to understand Vodafone's plans for the business including any initiatives such as network sharing, the exit terms from Bharti,'' said Dresdner Kleinwort analyst Robert Grindle.

Vodafone could look to realise more than