The world’s largest mobile operator, Vodafone Group Plc, will not be able to close its landmark acquisition in India by early April, after India’s Foreign Investment Promotion Board deferred making a decision.
In mid-February, Vodafone won a bidding war to take a controlling stake in Hutchison Essar Ltd, India’s fourth largest mobile operator. It paid in total roughly $18.8bn for the 67% Hutchison Essar stake held by Hutchison Telecommunications International Ltd, the telecoms arm of Hong Kong conglomerate Hutchison Whampoa.
The deal had been expected to close on April 2, but so far the deal has proved anything but straight forward for the Newbury, UK-based operator.
Vodafone had to fight off efforts by private equity groups and Indian rival operators to in order to secure the stake. Vodafone chief executive Arun Sarin also had to court the Indian political establishment because Indian law only allows a foreign investor to own a maximum of 74% in a local company.
In addition to this, Sarin had to overcome opposition to the deal from the conglomerate Essar Group, which is the 33% minority shareholder and had originally made hostile noises over the stake sale, saying it had first rights to the stake.
But Vodafone reached an agreement with Essar last week, and is now waiting for the Indian authorities to sign off on the deal. Yet unfortunately for Sarin, the Foreign Investment Promotion Board has deferred its decision on Vodafone’s application until a meeting on March 29, meaning there is little chance of the deal being closed by April 2.
Approval by the FIPB is needed in order to ascertain that the joint venture between Vodafone and Essar meets the foreign direct investment guidelines in the telecoms sector.