Vodafone and Essar, the Indian conglomerate, are edging towards an agreement on the future governance and ownership of Hutchison Essar, India’s fourth-largest mobile operator.

Ravi Ruia, vice-chairman of Essar, could be chairman of Hutchison Essar once Vodafone completes its purchase of a controlling stake in the mobile operator, according to people briefed on the situation, who said a deal had not been finalised.

They added that Arun Sarin, Vodafone’s chief executive, could be vice-chairman of Hutchison Essar.

Vodafone last month announced it would buy companies controlling 67 per cent of Hutchison Essar from Hutchison Telecommunications International, a Hong Kong-listed company, for $11.1bn in cash.

Essar rejected Vodafone’s offer to buy its 33 per cent stake for $5.8bn. Instead, Vodafone and Essar have been discussing a shareholder agreement for Hutchison Essar.

The talks are taking place against a tense backdrop because Essar has been threatening legal action to enforce a claimed right of first refusal over the 67 per cent of Hutchison Essar that Vodafone plans to buy.

Talks between the two companies have partly focused on a put option that would give Essar the right to require Vodafone to buy all or some of its 33 per cent stake, depending on its future value, said people briefed on the situation.

Vodafone is insisting it should have full management control over Hutchison Essar. Mr Sarin said last month that Asim Ghosh, Hutchison Essar’s chief executive, would continue in his post. He has held several positions with Hutchison Whampoa, the Hong Kong- based conglomerate with a 50 per cent stake in Hutchison Telecommunications International.

Vodafone is sticking to its plans for a network-sharing deal in India with Bharti Airtel, the country’s largest mobile operator. Essar objected to the agreement when Vodafone unveiled the plans last month.

The plans are an important factor in Vodafone’s pledge that the Hutchison Essar deal will meet its financial criteria on acquisitions.

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