Vodafone Group announced a new agreement with its Indian partner Essar to buy out its stake in the mobile operator Vodafone Essar. Vodafone is paying USD 5.46 billion for the remaining 33 percent in Vodafone Essar, up from an earlier price of USD 5.0 billion indicated in late March. This includes USD 3.32 billion for an initial 22 percent from Essar Communications (Mauritius) and ETHL Communications Holdings, including withholding tax of USD 0.88 billion. The transfer of these shares to Vodafone was completed in two tranches on 1 June and 1 July. Whilst Vodafone and Essar believe that no tax is due on the share sale, they decided it was "prudent" to pay withholding tax. Vodafone is currently facing a lawsuit from the Indian tax authorities over tax allegedly due on its initial purchase of a controlling stake in the Indian operator. Vodafone will pay the remaining USD 1.26 billion for the last 11 percent held by ECHL and the settlement of all shareholder claims by 15 February 2012. The company expects that 1.35 percent of the shares in VEL will be transferred to an Indian investor to ensure Vodafone's continued compliance with Indian foreign direct investment rules. After closing of these transactions, Vodafone will own 74 percent of Vodafone Essar directly via its subsidiaries. The remaining 26 percent of VEL will be majority-owned and controlled by Indian shareholders.
