Essar strategy for BPL upsets Vodafone

12 Sep 2007

Just months after Vodafone Group acquired management control of Hutchison Essar, the British firm is headed for a fall out with its Indian partner, the Essar Group. The disagreement comes over Essar Group company BPL Mobile’s move to apply for licences covering 21 of India’s 23 circles. The application for the new licences was not made in the name of BPL Mobile, but a subsidiary called Shippingstop.com. BPL Mobile owns 51.24% of shippingstop.com; the rest is held by a former holding firm of BPL Mobile, BPL Communications.

Earier this week the Cellular Operators’ Association of India (COAI) began lobbying the Department of Telecommunictions (DoT) for an enquiry into the ownership of new licence applicants. Under Indian legislation a company may not have a stake – either direct or indirect – in more than one licensee providing the same service in the same service area. Essar, a 33% owner of Vodafone Essar, is also a shareholder in Mumbai-based cellco BPL Mobile. If BPL Mobile is awarded licences across India, then Essar would end up being owner of two telecom companies in the same licensed areas, which would run contrary to rules. The Ruia family-run Essar dismissed the idea saying the law only bars a stake of more than 10% in two companies in the same licensed area. ‘We have a 33% stake in Vodafone Essar and only a 9.9% stake in (BPL Mobile). So where does the violation arise?’ said Essar spokesman Manish Kedia.

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