Essar not to brook unilateral decisions

Contemplates legal action against Vodafone.

The Essar Group is contemplating legal recourse against Vodafone, the world's largest telecom group, if the latter takes any business decisions on Hutchison-Essar without consulting it.

Sources close to the development said the Essar Group, which holds a 33 per cent stake in Hutch-Essar, was unhappy with Vodafone's decision to share network with Bharti Airtel, in which Vodafone had a stake of nearly 10 per cent.

They added that the Essar Group had the "rights on some operations at Hutchison Essar, such as the company's business plan." The group would also oppose any attempt by Vodafone to rebrand the business, sources said.

The move is seen as a muscle-flexing exercise by the Essar Group to strengthen its bargaining position in Hutchison-Essar in which Vodafone is buying majority control.

Vodafone announced on February 11 that it would buy a 67 per cent stake in Hutchison Essar for $11.1 billion from Hong Kong billionaire Li Ka-shing's HutchisonTelecommunications International. The UK company will also offer to buy the remaining 33 per cent from the Essar Group.

An Essar spokesperson said, "Essar is awaiting an official communication from Hutchison on its proposed agreement to sell its stake to Vodafone, as reported. Once we receive this, Essar will evaluate all its options in the coming weeks and will take necessary steps in the best interests of the company."

The Essar Group claimed the right of first refusal after Li Ka-Shing put HTIL's 67 per cent stake in Hutchison-Essar on the block, which meant it had the right to match any offer for Hutchison's stake.

However, HTIL said Essar's right was limited to offers from Indian companies "� Reliance Communications was one of the bidders, apart from Essar itself.

Vodafone CEO Arun Sarin is expected to visit New Delhi tomorrow. He is likely to meet government and industry representatives, including those from the Telecom Regulatory Authority of India and the Hutchison-Essar brass. It could not be confirmed whether a meeting with the Essar Group promoters is a part of Sarin's agenda.

The deal values Hutchison Essar at $18.8 billion, including debt, and has high stakes for Vodafone, which has been accused by some investors of overpaying for purchases.