India's Hutch inquiry may delay Vodafone deal-paper

Tue Mar 27, 2007 1:57am EDT

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MUMBAI, March 27 (Reuters) - Vodafone Group Plc's (VOD.L) deal to buy control of India's Hutchison Essar could be delayed as the government investigates the structure of Hutchison Telecommunication's 2332.HK stake, the Economic Times reported on Tuesday.

The Economic Times said the finance ministry had sought the law ministry's opinion on a 12.26 percent stake held by Hutchison Essar Chief Executive Asim Ghosh and investor Analjit Singh, and on whether Hutchison Telecom was the beneficial owner of that stake.

Foreign ownership of telecoms companies is capped at 74 percent in India.

Hong Kong-based Hutchison Telecommunications International

(HTIL) has agreed to sell its majority stake in Hutchison Essar, India's fourth-largest carrier, to Vodafone Group Plc. for $11.1 billion.

HTIL controls 67 percent of the joint venture, with India's Essar Group holding the rest. Two-thirds of the Essar Group holding is through an offshore unit, which also counts as foreign ownership.

The Economic Times quoted sources saying that the Foreign Investment Promotion Board (FIPB) would consider the Vodafone deal only after receiving the law ministry's opinion.

"Various stakeholders representing the companies concerned have been called for a meeting at the finance ministry on March 28, but the law ministry's opinion is unlikely to be available so soon," the paper said, quoting highly placed government sources. The paper said Hutchison Essar was expected to explain the company's equity structure at the meeting.

On Monday, Hutchison Telecom spokeswoman Mickey Shiu told Reuters the company had met all FDI compliance.

The Times of India reported that sources from Vodafone and Hutchison Telecom were confident the deal would be approved, saying there was no problem with the existing shareholdings.

Vodafone chief executive Arun Sarin told Indian reporters invited to the company's British headquarters that the deal was struck only last month and it took time to get approval.

"At the end of the day, I want FIPB, the ministry of finance, the telecommunications industry, the industry ministry and the prime minister to say that you are welcome here," the Economic Times quoted him as saying.

"The last thing we want to do is show up one fine day and then people ask, "Hey hang on, which door did you come from, was it the front door, back door or side door?"

((Reporting by John Mair, editing by Andrew Callus; e-mail:govardhana.rangan@reuters.com; +91-22-6636 9246)) Keywords: HUTCHISON INDIA/

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