Vodafone miffed over partner Essar’s merger move

The rift between the UK's Vodafone Group and its joint venture partner in India Vodafone Essar widened on Tuesday as Vodafone criticised the Ruias-promoted Essar Group for a proposed restructuring of its telecoms business.

Essar plans to reverse the telecoms business into its quoted financial business India Securities Ltd (ISL). Vodafone said ISL was a highly illiquid vehicle with more than 95 per cent of the shares under the control of Essar Group.

It said, ''Accordingly, small amounts of buying or selling could distort ISL's share price. Vodafone does not wish a company in which it holds a majority interest to become the subject of a false market. Vodafone is concerned that the value of ISL could be misinterpreted as a fair market value of Vodafone Essar.''

Vodafone has also served its objections on Essar's counsel in the Madras High Court.Essar's reply is that the proposed deal had nothing to do with Vodafone, and it is studying the company's comments.

The spat between the joint venture partners has basically occurred because the British telecom firm objects to a potential merger between two Ruias promoted companies - Essar Telecommunications Holdings Private Ltd (ETHPL) and ISL.

The Essar Group owns 33 per cent stake in Vodafone Essar, of which 11 per cent is held by ETHPL. Vodafone has written to the Bombay Stock Exchange and the Securities and Exchange Board of India to express its concerns regarding the reverse listing of ETHPL into ISL and has asked for the matter to be examined.