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Vodafone's ambitions in India received a significant boost yesterday after a leading shareholder threw its weight behind the company.
The support of Standard Life Investments comes as the company battles two rivals to buy out the Asian conglomerate Hutchison Whampoa's controlling stake in Hutchison Essar, India's fourth biggest mobile group.
Wesley McCoy, investment director - UK equities at SLI praised Vodafone's strategy of pushing into emerging markets and said the success of its Turkish deal "bodes well" for future moves.
It follows reports of concerns among some shareholders that the company could overpay for Hutchison Essar now a full-scale auction has developed between it, minority partner Essar, and Reliance Communications, India's second biggest mobile operator.
Mr McCoy said in response to questions about Vodafone's Indian ambitions: "Vodafone have recently expressed an appetite to leverage their brand in fast growing emerging markets.
"In order to ease worries about them overpaying to satisfy this appetite, the company has committed publicly to strict investment hurdles which should ensure they do not overpay for any asset.
"The last major transaction in an emerging market from Vodafone was Turkey, where they are now trading ahead of their initial expectations, which bodes well for future moves."
Standard Life has a 1.7 per cent stake in Vodafone, which last week said it was considering a bid for Hutchison's stake.
It is thought to have indicated it could launch an offer valuing the group at up to US$18 billion ($26 billion).
The mobile operator was initially criticised when it bought Turkey's Telsim Mobil Telekomunikasyon Hizmetleri AS in May for US$4.55bn, because some felt it was paying too much.
However, the company earlier this month said margins at the unit would be better than expectations while the cost of upgrading it would be 29 per cent lower than had been thought.
Despite the words of support from Standard Life, Vodafone shares in the UK fell 1pence to 142pence amid concerns about an auction.
Vodafone would have to sell its 10 per cent stake in Bharti-Airtel - India's biggest mobile operator - should it succeed with a bid for Hutchison Essar.
It would also only be able to hold 74 per cent of the shares under Indian rules.
However, a deal would give Vodafone entry into the world's fastest growing market which has just 130 million mobile users out of a population of more than a billion.
Yesterday it emerged that Reliance had raised funds to launch a bid of its own for Hutchison Essar in conjunction with the private-equity house Blackstone.
Essar has also established a line of credit to buy out its partner.
Together, Reliance and Hutchison Essar would have about 50 million subscribers, overtaking Bharti Airtel.
"I've lost count of the number of private-equity people that have lined up," the Reliance chairman Anil Ambani said.
"Financial institutions are ready to provide both debt and equity." The partners are set to get US$15bn from a consortium of banks led by Citigroup and UBS.
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