Arbitration panel on BPL Mobile spat set up

The arbitration panel to settle the dispute over BPL Mumbai circle was constituted even before the Hutch-Vodafone deal was announced on February 11.

A 132-page circular issued by Hong Kong-based Hutchison Telecom International Ltd (HTIL) on Wednesday said, “The panel was constituted as of February 5, 2007.”

This means the arbitration panel was formed just a week before UK’s Vodafone won the bid to buy the controlling stake in Hutch Essar.

The Bombay High Court had, in August 2006, referred the dispute over BPL Mobile Mumbai circle, which is fully owned by Essar, to an arbitration panel.

The dispute arose after Essar decided to keep BPL Mumbai operations separately even as it combined its other firm, BPL Communications, with the merged Hutch-Essar.

The court, that time, also restrained Essar group from selling shares or creating any third party interest in BPL Mobile Communications till the dispute was settled by an arbitration tribunal, constituting representatives from both Hutchison and Essar, along with a neutral member.

But, the tribunal was not formed for several months, while Essar maintained that it would run BPL Mumbai on its own.

Wednesday’s document adds that Hutch Essar was taking all steps to settle the BPL issue in accordance with the terms of the BPL Mumbai share purchase agreement.

According to the document, Vodafone has agreed in its agreement with Hutch “to make an offer to acquire from the Essar group its entire interest in the Hutch Essar group at a price which values its interest on the same basis as the sale share.”

The Vodafone-Hutch deal is expected to be completed by April 2. HTIL will not compete with Vodafone in India for three years after the completion of the deal, the circular says.

So far, the Hutch-Vodafone deal does not include BPL Mumbai.

But, Vodafone CEO Arun Sarin had indicated during his recent India visit that the BPL Mumbai issue would be discussed with Essar, which has expressed its intention of remaining partners in the venture with Vodafone.

Essar has also stated that it wants “partnership of equals” and “joint management” in the new venture. Essar holds 33% in Hutch Essar.

BPL Mumbai vendors cannot sell or otherwise deal in the shares of BPL Mumbai till four weeks after the constitution of an arbitration panel, the HTIL circular states. In other words, BPL Mumbai cannot be sold to a third party till March 5.

The Essar group had terminated the deal for the sale of BPL Mumbai to Hutch Essar on August 1, 2006, citing lack of government approvals.

Subsequently, Hutch Essar approached the court, seeking a stay on the termination of the sale purchase agreement as well as stay on the sale of BPL Mumbai shares to third parties, pending arbitration.

Hutch Essar had entered into a share purchase agreement with BPL Communications Ltd, Capital Global Ltd and Essar Teleholdings Ltd (together called BPL Mumbai vendors) to acquire a 99.99% of the issued share capital of BPL Mobile Communications (BPL Mumbai) on December 23, 2005.