LONDON: Vodafone has clinched a deal with Indian conglomerate Essar to secure operational control of India's fourth-largest mobile group, Hutchison Essar, expanding into the world's fastest-growing major mobile market.

The deal, announced on Thursday, gives Essar an option to sell its 33 percent stake in the Indian mobile operator to Britain's Vodafone for $5 billion between the third and fourth anniversaries of the deal's completion, expected in a few weeks.

Alternatively, Essar, an Indian conglomerate with interests in steel, oil and shipping, could sell shares worth between $1 billion and $5 billion in the renamed Vodafone Essar to Vodafone at an independently appraised valuation.

Vodafone agreed to acquire a majority stake for $11.1 billion last month from Hong Kong's Hutchison Telecommunications International Ltd.

Essar had previously demanded joint management of the company and said it might seek to increase its stake, raising fears Vodafone's plans in India would not run smoothly.

"It's good the two companies have reached an amicable partnership agreement. The market can now move on to anticipate operational success rather than ownership debates," said Dresdner Kleinwort analyst Robert Grindle.

Vodafone shares were 0.75 percent up at 135-1/4 pence by 0930 GMT, off highs of 136-1/4p.

Vodafone Essar

Vodafone said the venture would be renamed Vodafone Essar and it would market its services in India under the Vodafone brand in due course.

Essar Vice Chairman Ravi Ruia will be appointed chairman of Vodafone Essar, while Vodafone Chief Executive Arun Sarin will be vice chairman.

Vodafone will appoint seven directors to the Indian company's 12-member board, with Essar appointing four. Indian businessman Analjit Singh, who along with Hutchison Essar Chief Executive Asim Ghosh controls 15 percent of the Indian mobile company, will also be a board member.

"Essar has played a key role in transforming this business into a leading Indian mobile operator. We look forward to leveraging this experience and working with our partner as the company enters its next phase of growth," Sarin said in a statement.

The purchase, which India-born Sarin has referred to as a "homecoming", is Vodafone's third-largest acquisition, and the group, which has been accused by some investors of overpaying for acquisitions in the past, is keen to prove to investors it has struck a canny deal in India.

With more than 150 million mobile subscribers but a market penetration of only around 15 percent, India is already the world's fourth-biggest mobile market behind China, the United States and Russia.

It is the fastest-growing major mobile market and is expected to overtake Russia this year. At its current growth rate, India will have half a billion mobile users by 2010.

Hutchison Essar, which ranks behind Bharti Airtel, Bharat Sanchar Nigam Ltd and Reliance Communications, had 25.3 million users at the end of February.

(Additional reporting by Dan Lalor)