The war of words between UK-based Vodafone and Essar Group, its Indian partner, has seen no signs of abating in recent days forcing Vodafone to issue a statement yesterday outlining its current position. In the statement, Vodafone refuted Essar’s allegation that it was trying to suppress the value of Vodafone Essar – their Indian mobile joint venture – by blocking Essar’s planned IPO of part of its stake. Essar owns 33 percent in Vodafone Essar of which 11 percent is held by Essar Telecommunications Holdings (ETHPL), and the rest through another unlisted company. Essar now plans to merge ETHPL with a listed group company, India Securities (ISL), which some believe is a strategy to determine a market value for the unlisted operator. “Essar appears to admit in its statement that the only purpose of the [ISL] merger is the discovery of the fair market value of Vodafone Essar,” Vodafone said yesterday. However, it reiterated that it is not blocking the IPO despite earlier writing to the Indian authorities objecting to the move on the grounds that “material information has not been provided to the market.”

According to India’s Economic Times newspaper, Vodafone is worried that the ETHPL/ISL merger would create “a backdoor entry” to investing in Vodafone Essar and could ramp up the price Vodafone would need to pay to buy-out Essar. Under the current terms of the JV, Essar has until 8 May to decide if it wants to sell a part or the entire stake to Vodafone. Should the Indian partner sell the entire stake it would receive US$5 billion. However, if it chooses to sell only part of the stake to Vodafone, this price would be determined by the market rate. Essar’s latest move, commentators say, is a strategy to find out which option would represent best value-for-money for the Indian firm.