Essar may get Rs 3,400 cr from Vodafone

Telecom giant Vodafone has agreed to pay Rs 3,400 crore to the Essar group over and above the fair market price if the company exercise the option of selling its 33 per cent or less stake in their India joint venture.

This amount, however, is payable in the event that the Essar group exercises its put option to sell some or all of its Vodafone Essar shares at a fair market value, provided that the maximum aggregate amount payable shall not exceed $5 billion.

The put option of the Essar Group's stake in Vodafone Essar expires in May, 2011. By the 2007 shareholder agreement between the two, Essar has the "put" option of divesting its stake in the Vodafone Essar telecom venture. But Essar has to exercise that option within a one-year window, starting May 8, 2010.

The additional amount, according to Vodafone, is not payable in the event that the Essar Group decides to sell its 33 per cent shareholding in Vodafone Essar at the underwritten value of $5 billion.

"Vodafone agreed to adjust the payments that would be made under the fair market value put arrangements with the Essar group, in order to take account of the upfront cost of 3G licences, based on the total price of the licences secured," the company said in a statement announcing its first quarter results.

Meanwhile, Vodafone today reported a 4.8 per cent jump in service revenues to 11.3 billion pounds for the three months ended June, 2010. The rise in revenues was primarily led by good growth in emerging markets such as India and Turkey.

In the June quarter, Vodafone saw revenue from India increase by 26.4 per cent to 954 million pounds.

"These are the first quarterly results to show service revenue growth since the global recession impacted. We have achieved these results through our continuing commercial approach in key European markets, focusing especially on data and from strong growth in emerging markets, with India now cash positive at an operating level and our highest ever quarterly revenue in Turkey," Vodafone Chief Executive Vittorio Colao said.