Emerging market growth
"This deal helps Vodafone on a couple of fronts; finally bringing it significant emerging market growth as well as providing a balance sheet catalyst," said Merril Lynch analysts in a note to clients.
The news was also welcomed by investors who sent Vodafone's shares jumping 2.51 per cent to 153 pence in mid-afternoon London trade.
Vodafone will assume about $2 billion of debt and the agreement values Hutchison Essar, India's fourth-biggest mobile phone operator, at about $18.8 billion.
"It has to be a good deal for them ... They hit the jackpot again"
Francis Lun, general manager, Fulbright Securities, Hong Kong
According to Vodafone, Hutchison Essar had about 23.3 million customers in India at the end of December 2006, which was equivalent to about 16.4 per cent of the country's total mobile phone market.
India currently has about 150 million mobile phone users and a total population of approximately 1.1 billion people.
Fierce competition in its core European markets has put Vodafone on the back foot in recent years.
Vodafone sold its 25 per cent stake in Swisscom Mobile to Swisscom for $3.49 billion last year.
The group also sold struggling Japanese unit Vodafone KK to Japanese internet group Softbank Corp for about $17.3 billion.
At the same time, Vodafone snapped up Telsim, the second-biggest Turkish mobile telephone operator for $4.55 billion, giving it an additional 11.7 million customers.
Broker JP Morgan cited the Telsim acquisition as evidence of its ability to absorb emerging market companies.
"Although the forecasts Vodafone is using to justify the [Hutchison Essar] bid price may be regarded as punchy, its track record at Telsim lends credibility when it comes to squeezing performance from emerging market assets."
The deal is Vodafone's third-biggest ever and it beat three rival suitors for the stake, India's Reliance Communications and the Hinduja and Essar groups, the last of which owns 33 per cent of Hutchison Essar.
Francis Lun, general manager at Fulbright Securities in Hong Kong, said: "Considering that they only put HK$20 billion [US$2.6 billion] into India, it has to be a good deal for them.
"They hit the jackpot again."