Vodafone's Essar India deal hits new snag: Report

The strained relationship between Vodafone and Indian partner Essar appeared set for new lows on Friday after Indian media said Essar wanted more money to quit their joint venture.

Vodafone announced a deal last month to pay a predetermined price of $5 billion to buy Essar out of Vodafone Essar to give it direct ownership of 75% of India's third-biggest operator and bring an end to their fractious relationship.

Essar, which clashed openly with Vodafone during their partnership, declined to comment at the time, and on Friday three Indian newspapers cited sources as saying the Indian group might ask for more money or seek some form of arbitration.

Citing people familiar with the development, the Economic Times said Essar wanted $600 million-$700 million more from Vodafone to sell its 33% holding.

Last month's agreement came about after Essar exercised its put option over 22% of the stake, allowing Vodafone to exercise its call option over the remaining 11%.

However, the Times of India said Essar was not willing to readily give up the 11%.

The Economic Times said Essar would invoke a Reserve Bank of India resolution that says Indian shares in privately held firms should be valued under the discounted cashflow method.

Under this method, Essar's 11% stake would be worth $1.8 to $1.9 billion, compared with the purchase option that puts it at $1.2 billion, the paper said.

"We are bound by the confidentiality obligations under our agreement with Vodafone and, therefore, we would not like to comment," an Essar group spokesperson told Reuters.

A Vodafone spokesperson in London said they would not comment as the newspapers merely cited "sources" but pointed out that the agreement announced last month between the two sides was legally binding.

Vodafone had said the final settlement between the two sides was expected to be made no later than November this year.