British giant Vodafone and Indian conglomerate Essar group reached an agreement on Thursday for jointly running India's fourth largest mobile firm -- Hutch-Essar, which would be rechristened Vodafone Essar.

The two companies said in a joint statement that they have agreed on partnership terms for Hutchison Essar, in which Vodafone is acquiring 67 per cent stake from Hong Kong's Hutchison Telecom International Ltd while Essar would continue to retain its 33 per cent stake.

"The partners have agreed that Hutchison Essar will be renamed Vodafone Essar and in due course the business will market its products and services under the Vodafone brand," it said.

Under the terms of the partnership, Vodafone will have operational control of Vodafone Essar and Essar will have rights consistent with its shareholding, including proportionate Board representation.

Ravi Ruia will be appointed chairman of Vodafone Essar and Arun Sarin will be vice chairman.

Under the partnership terms, Essar will have an option to sell its 33 per cent stake to Vodafone for $5 billion between the third and fourth years or an option to sell between $1 billion and $5 billion worth of Vodafone Essar shares to Vodafone at an independently appraised fair market trading value.

Earlier during the day, Sarin and Ruia had met Telecom Minister Dayanidhi Maran and had briefed him about future plans of their joint venture.

Sarin had also struck an optimistic note about signing a deal with Essar for jointly running India's fourth largest mobile firm, to be called Vodafone Essar.

"..Hopefully that is something we might be doing here," Sarin had told reporters.

Last month, the UK giant had clinched a deal to acquire 67 per cent controlling stake in Hutch-Essar from Hong Kong based Hutchison Telecom International Limited.

Sarin is expected to fly to Mumbai on Thursday evening, where the Ruias are hosting a dinner for the India born CEO of the British firm.

Vodafone, Essar press statement

Following is the statement issued by Vodafone and Hutch on the partnership agreement:

Vodafone and Essar have reached an agreement under which they will work to continue the growth of Hutchison Essar Limited ("Hutchison Essar"), one of India's leading mobile operators.

This follows Vodafone's announcement on 11 February 2007 that it had agreed to acquire Hutchison Telecommunications International Limited's ("HTIL") controlling interest in Hutchison Essar, in which Essar is and will continue to be a 33% shareholder.

The partners have agreed that Hutchison Essar will be renamed Vodafone Essar and, in due course, that the business will market its products and services under the Vodafone brand.

With penetration levels of around 13%, both partners believe that there are substantial growth opportunities in the Indian mobile telecommunications market. Vodafone is the leading international mobile operator with an extensive range of products and services, many of which are not currently available in India.

Essar is a major industrial group with a deep understanding of India and the Indian mobile telecommunications industry.

With these complementary strengths Vodafone and Essar plan to broaden Vodafone Essar's service offering and enable it to become the leader in the Indian mobile telephony market. 

Commenting on the new partnership, Arun Sarin, Chief Executive of Vodafone said: "I am delighted that Essar and Vodafone have agreed the terms of an ongoing partnership. Essar has played a key role in transforming this business into a leading Indian mobile operator. We look forward to leveraging this experience and working with our partner as the company enters its next phase of growth in the attractive Indian telecommunications market. We will be bringing the relevant range of Vodafone products and services to the Indian consumer."

Ravi Ruia, Vice Chairman of Essar, added: "It is terrific that we are joining with the world's leading international mobile company.  I welcome them as our partner into this successful business which we will now take forward to the next level.  Essar was a founding partner in Hutchison Essar and played an active role in building the company, including extending network coverage into several profitable regional markets.  By partnering with Vodafone we expect to create further value in the business."

Under the terms of the partnership, Vodafone will have operational control of Vodafone Essar and Essar will have rights consistent with its shareholding, including proportionate Board representation. Ravi Ruia will be appointed by Vodafone as Chairman of Vodafone Essar and Arun Sarin will be appointed by Essar as Vice Chairman.

Essar will have certain liquidity rights including, between the third and fourth anniversaries of completion, and subject to regulatory requirements, an option to sell its 33% shareholding in Vodafone Essar to Vodafone for US$5 billion or an option to sell between US$1 billion and US$5 billion worth of Vodafone Essar shares to Vodafone at an independently appraised fair market trading value.

Vodafone expects to complete the acquisition of HTIL's interest in Hutchison Essar in the coming weeks.

The race for Hutch-Essar: Complete Coverage

(Above) Vodafone CEO Arun Sarin (right), Essar mobile group Vice Chairman Ravi Ruia (left) and IT and Telecommunication Minister Dayanidhi Maran shake hands at a meeting on joint-venture at Maran's residence in New Delhi on Thursday. Photo: Raveendran/AFP/Getty Images