Vodafone Seeking Damages From Indian Partner

India's Vodafone Essar is seeking damages of around Rs 1,100 crore (US$252 million) from the Essar Group for not transferring shares in Mumbai based BPL Mobile to the company. As part of Vodafone's move into the Indian market, the company agreed to buy BPL Mobile from the Ruias of the Essar Group and merge it with Vodafone Essar.

The Ruias originally brought BPL Mobile on behalf of Hutch in 2005, but then refused to transfer the ownership, citing lack of regulatory permission for the merger of BPL with Hutch (now Vodafone Essar) after their agreement ended in August 2006.

"In case BPL Mobile is not transferred to Vodafone, the company will claim the consideration it has paid (Rs 1,617 crore), interest on this amount and damages for not transferring the shares. As the business plans for merger of licences (of VEL and BPL Mobile) could not take place, VEL has suffered loss of business and it wants to be compensated for the same," sources told the Economic Times newspaper.

If the Ruias agree to hand over the company - then the damages would be proportionately reduced.

The dispute between the two companies has been referred to a tribunal, which is expected to make a decision on the matter next month.

Although the Ruias own 33% of Vodafone Essar and should be prevented from setting up competing companies, it is thought that they want to hold onto BPL Mobile and use its licenses to build up another telecoms operator. Vodafone is known to has sought legal advice over the firms plans to build a national wireless local loop operator, Loop Telecom.

According to figures from The Mobile World subscriber database, BPL Mobile had just under 1.38 million subscribers in the highly prized Mumbai circle at the end of the first half of this year. Vodafone Essar had just under 3.7 million subscribers in Mumbai at the end of the same period.

On the web: Economic Times - Mobile World

Posted to the site on 22nd August 2008