Mandelson backs Vodafone's India battle

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Peter Mandelson, the European Union Trade Commissioner, has thrown his support behind Vodafone's bid to take over India's fourth-largest mobile phone operator after urging Indian authorities to treat the British company and its local rivals equally.

Mr Mandelson has spoken with Kamal Nath, India's Commerce and Industry Minister, over recent days. A source close to Mr Mandelson said the EU Commissioner "emphasised the importance of fair and transparent access terms for foreign companies looking to enter the Indian communications market".

The source said Mr Mandelson had been contacted by Vodafone before speaking to Mr Nath but was not acting on behalf of the British mobile phone company. A foreign company cannot own more than 74 per cent of any Indian telecoms company according to current regulation. Hutchison Whampoa, the Hong Kong conglomerate, is selling its 67 per cent stake in Hutchison Essar and has attracted interest from a host of local and international players.

Vodafone has stepped up the pace in the battle for Hutchison Essar as it looks to steal a march on its local rivals by lodging a bid worth up to $20bn. The company has met Indian telecoms authorities over recent days and has started conducting due diligence over the mobile operator's books. Arun Sarin, Vodafone chief executive, is to meet Mr Nath and Prime Minister Manmohan Singh over the coming days according to Indian press reports.

Vodafone faces stiff competition from Essar Group, the minority shareholder in Hutchison Essar, as well India's second-largest mobile operator Reliance Communications that is backed by a host of private equity companies. The billionaire Hinduja brothers have also expressed an interest.

Essar believes it has right of first refusal over Hutchison's stake in the joint venture due to a legal agreement between the two companies.