Vodafone moves towards £10bn float of Indian arm

Indian pharmaceutical firm Piramal Healthcare is buying Essar's last-remaining 5.5% stake in VIL for £385 million in cash, taking Piramal's total shareholding to around 11%.

Vodafone confirmed that under the terms of the deal, Piramal could take part "in a potential initial public offering of VIL" or a sale of its stake to Vodafone.

Piramal's purchase values VIL at £7 billion but analysts reckon the eventual valuation will be higher.

Broker Espirito Santo said: "This looks way too low to us - probably explained by the small, illiquid and non-controlling nature of the stake, and the fact that the Essars were more or less forced sellers.

"We assume Piramal would not have entered into the transaction if it did not see an opportunity to create value in the eventual IPO."

Under India's strict foreign ownership rules, the British mobile giant cannot own 100% of VIL, so Vodafone must have a local partner.

Essar first agreed in July 2011 to sell its 33% stake in VIL.

"We believe Piramal to be a more a 'friendly' shareholder than the Essars," said Espirito Santo.

Vodafone has 145 million mobile customers in India, against 19 million in Britain, but the vast majority are on low-spending, prepay deals at present. Chief executive Vittorio Colao has been focusing on India and other emerging markets while exiting other countries such as China, Japan and France.

The plan for a stock market float of VIL would be likely to follow the template of Vodafone's South African subsidiary, Vodacom, which also has its own listing.

... but collapse of merger talks derails greek ambitions

Vodafone's efforts to consolidate in the Greek mobile market received a blow today as merger talks with local operator Wind Hellas collapsed.

The two firms, numbers two and three in the Greek market, had been hoping to link up in a bid to challenge Cosmote, the dominant player with a 50% share.

But it is thought that European regulators have signalled their opposition to the Vodafone-Wind Hellas merger because it would mean that the Greek market would have only two main operators with around a 50% share of the market each.

"This allows Vodafone to withdraw without suffering the ignominy of public rejection," said broker Espirito Santo, which expects Vodafone to focus on organic growth in Greece.