Dec. 22 (Bloomberg) -- Vodafone Group Plc, the world's largest mobile-phone company, may make an offer for a controlling stake in India's Hutchison Essar Ltd. to gain direct access to the world's fastest-growing wireless market.

The process is ``at an early stage,'' Newbury, England-based Vodafone said in a Regulatory News Service statement today. Hong Kong billionaire Li Ka-shing's Hutchison Telecommunications International Ltd. said ``various potentially interested parties'' have approached it about its Hutchison Essar shares.

Vodafone wants Hutchison Essar, India's fourth-biggest wireless company, to add more than 20 million subscribers in a growing market. Blackstone Group LP and Reliance Communications Ltd., India's second-largest mobile-phone company, asked banks led by Citigroup Inc. and UBS AG to lend almost $15 billion to fund a buyout of Hutchison Essar, bankers with direct knowledge of the deal said.

``India fits nicely with Vodafone's focus on large and fast- growing markets and Hutchison Essar would allow them to get control of a fast-growing player in that market,'' said Philippe Kiewiet de Jonge, who helps manage about $635 million, including Vodafone shares, at ABN Amro Asset Management in Amsterdam.

India is the world's fastest-growing wireless market and only 17 percent of its 1.1 billion people have either a mobile or a fixed-line phone, according to the country's phone regulator. Almost everyone in Western Europe owns a wireless handset.

Shares of Vodafone fell as much as 2.75 pence, or 1.9 percent, to 141 pence, and traded at 142 pence as of 12:35 p.m. in London. Before today, they were up 15 percent this year.

Emerging Markets Strategy

Chief Executive Officer Arun Sarin is abandoning saturated markets or where Vodafone doesn't have majority stakes. Vodafone last month sold its 25 percent stake in Proximus in Belgium. Earlier this week, Vodafone agreed to sell its entire quarter stake in Swisscom AG's mobile unit. It has stakes, ownership and partnerships with companies in emerging markets including Turkey, Egypt, South Africa, China and Romania.

The U.K. company this month told investors it would like to raise its 10 percent holding in India's Bharti Airtel Ltd.

``India is a strong market for growth, but the prices reflect that. This doesn't look cheap at the moment,'' said Morten Singleton, an analyst at WestLB in London. ``If we enter a bidding war, Vodafone will either end up overpaying or lose and soil its relationship with its Indian partner Bharti.''

Sarin's Largest Purchase

Hutchison Essar, founded in 1994, would be the largest purchase for Sarin. Under him, Vodafone acquired the stake in Bharti for $1.5 billion in December 2005 and Turkey's Telsim Mobil Telekomunikasyon Hizmetleri AS for $4.55 billion in May.

Vodafone's board agreed to pursue a bid for Hutchison Essar of more than $13.5 billion, the Financial Times reported today.

Vodafone said the talks may not lead to a transaction. Buying into Hutchison Essar would be consistent with its ``stated strategy of seeking selective acquisition opportunities in developing markets,'' Vodafone in the statement.

``No agreement in respect of such possible sale has been entered into,'' Hutchison Telecommunications said in a PR Newswire statement today. The company reiterated ``there is no assurance that a sale may result from these approaches.''

Shares of Hutchison Telecommunications, which holds 67 percent of Hutchison Essar, rose 62 H.K. cents, or 3.5 percent, to HK$18.28 in Hong Kong. India's Essar Group owns the rest.

``There is currently not much coordination between the two shareholders in Hutchison Essar, so the company may benefit from better management and increased capital commitments if Vodafone gains control,'' said Vikash Mantri, an analyst for SBI Capital Markets Mumbai.

`Cannot Overpay'

For Vodafone, ``it's an intelligent move, but they cannot overpay,'' said Boris Boehm, a fund manager at Nordinvest in Hamburg, which oversees $7 billion including Vodafone shares. ``If you pay for something which doesn't instantly generate more cash flow, it won't be appreciated as much.''

India is adding two new mobile users every second and had 143 million subscribers at the end of November after a record monthly addition of 6.8 million users.

Vodafone won 7.2 million customers globally in the quarter through September, for a total of 192 million clients, including at units where it holds stakes.

The cost of a credit-default swap based on 10 million euros ($13.2 million) of Vodafone debt rose to 24,542 euros today from 24,375 euros yesterday, the most since Nov. 29, according to data compiled by Bloomberg. The contracts are financial instruments based on corporate bonds and loans that are used to speculate on a company's ability to repay debt. An increase indicates deteriorating credit quality.

Blackstone-Reliance

The group made up of Blackstone and Reliance, which is controlled by billionaire Anil Ambani, 47, is in a better position as it already has operations in India and can apply synergies to the deal, WestLB's Singleton said.

``If a bidding battle develops, then Reliance may be able to offer a higher price for Hutchison Essar because it can get more synergies from a deal,'' SBI's Mantri said.

ABN Amro Holding NV, Barclays Plc and Deutsche Bank AG may help finance that group's purchase of the company, said the bankers, who declined to be named before the announcement.

An agreement would allow Reliance to overtake Bharti Airtel.

For Vodafone, ``whatever happens, this will definitely mean that the damage has been done in terms of hurting the relationship with Bharti, a company in which the route to a controlling stake was clearly not there,'' ABN Amro's Kiewiet de Jonge said.

Mumbai-based Hutchison Essar didn't discuss the possible sale of the company at a board meeting today, Managing Director Asim Ghosh told reporters in Mumbai today. ``We did have a board meeting, but it was a routine internal quarterly meeting.''

To contact the reporters on this story: Kenneth Wong in Berlin at kwong11@bloomberg.net; Alex Armitage in London at aarmitage@bloomberg.net

Last Updated: December 22, 2006 07:42 EST