The deal between Essar and Vodafone Pls has been termed as a win-win situation by analysts.

While Essar gets a premium value for its equity stake, the British company gets full control over the company. It also ends the number of disputes between the two partners that had come out in public recently.

“This is a good deal for both partners,” said Mr Prashant Singhal Partner (Telecom), Ernst & Young.

“Essar has got an extremely good value under the current market situation. At a time when the valuations of most telecom companies have come down drastically, Essar has got $5 billion, which is a premium. The other gain for Essar is that now it can look at entering the telecom business separately.”

According to market watchers, the 33 per cent stake held by Essar was probably worth no more than about $3 billion at current market prices.

Essar can also now technically increase its holding in Loop Telecom. The company was forced to bring down its holding to under 10 per cent to comply with crossholding rules governing the telecom sector. But after exiting Vodafone, the Ruias can look at new telecom ventures.

Vodafone also gains from the deal as it can now go full steam in implementing its strategy for the Indian market.

The British company and the Essar Group had been at loggerheads over a number of issues, which may have come in the way of taking critical decisions. The deal brings an end to the highly fractious relationship.

“Though the pay out to Essar is at a premium, there are other tangible benefits to Vodafone in terms of management and operations. They can now get more aggressive and position themselves for new opportunities in the market,” said Mr Kunal Bajaj, Managing Director, Analysis Mason (India).

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