Indian Regulators Delay Approval Of Vodafone Deal

India’s foreign investment regulator has deferred a decision on Vodafone’s plans to buy Hutchison Telecom’s controlling stake in Hutchison Essar.

After a meeting of the Foreign Investment Promotion Board, Finance Secretary Ashok Jha told reporters in New Delhi that the board had asked for more details on the deal.

This is the second time the board has deferred approval. Jha was quoted as saying the board would make its decision soon, but he didn’t specify when.

Last month, Hutchison Telecom agreed to sell its 67% stake in Hutchison Essar to Vodafone for $11.1 billion. The Essar Group holds the remaining 33% in India’s fourth-largest cellular service provider, which has about 25 million subscribers.

Indian law only allow 74% foreign direct investment in telecom companies, and authorities are looking into the ownership structure of Hutchison Essar. This month, a citizens group filed a petition charging that foreign ownership in the firm was above 74%.

Apart from Hutchison Telecom’s stake, 22% of Essar’s stake is held by foreign shareholders.

The controversy is over the 12.3% stake held by Asim Ghosh and Analjit Singh.

Though both are Indians, Hutchison Telecom funded their acquisition of the shares and held options to buy them out. Because of this, it has been argued that Hutchison controlled their stakes, and hence it should be counted as foreign investment.

Both of them have denied the charge, as well as reports that Vodafone will now control their stake.

Vodafone appears confident of jumping the regulatory hurdles. A spokesperson for the U.K. cellular giant said the deal was expected to close in the second quarter, as scheduled.

Hutchison Telecom’s chief Dennis Lui was quoted as telling reporters in Jakarta, Indonesia, that the company’s ownership in Hutchison Essar was in full compliance with foreign investment regulations and that had been confirmed last year.

“It should not take too long for the sale to be concluded,” he said.