Vodafone won the fiercely contested battle for control of Hutchison Essar last night, in a deal valuing India’s fourth largest mobile operator at almost $19bn (£9.75bn). It will be the single largest foreign investment in India’s history.

Vodafone’s bid, which gave Hutchison Essar an enterprise value of $18.8bn, topped rival offers. The deal should provide a much-needed boost to slowing top-line growth at Vodafone, the world’s largest mobile operator by revenue.

Arun Sarin, Vodafone chief executive, is likely to face questions from some investors about whether the group has overpaid.

On Monday Mr Sarin said: “We have concluded this transaction within our stated financial investment criteria and we are confident that this will prove to be an excellent investment for our shareholders. Hutch Essar is an impressive, well-run company that will fit well within the Vodafone group.”

However, one of Vodafone’s bigger shareholders said: “The price looks a bit high and may well get resistance from shareholders. It will be tricky to square $19bn with investors.”

Nevertheless, Vodafone shares rose 2.5 per cent to 153p in midday London trading.

As part of the deal, Vodafone has signed a network sharing agreement with Bharti Airtel, India’s largest mobile operator, which could provide big savings and therefore help the group meet its financial criteria on acquisitions.

At the same time, it has granted Bharti an option to buy out Vodafone’s 5.6 per cent direct stake in Bharti for $1.6bn, double the acquisition price. If the option is not exercised, Vodafone would be free to sell the stake to a third party while retaining a 4.4 per cent indirect stake.

Vodafone’s bid surpassed offers by Reliance Communications, India’s second-largest mobile operator; Essar, an Indian conglomerate that already owns 33 per cent of Hutchison Essar; and the Hinduja group, another Indian conglomerate.

Mr Sarin said Hutchison Essar’s enterprise value of $18.8bn made it Vodafone’s third largest deal.

Vodafone has agreed to pay $11.1bn in cash for the 67 per cent of Hutchison Essar owned by Hutchison Whampoa, the Hong Kong-based conglomerate, through its subsidiary Hutchison Telecommunications International. It is also assuming $2bn of net debt.

An internal rate of return of 14 per cent is targeted. Excluding amortisation, the deal is seen as earnings neutral in the first year and accretive thereafter. Including amortisation, it will be 7 per cent dilutive in the first year and neutral by the fifth year.

Essar said Vodafone had invited it to be a partner in Hutchison Essar. India’s foreign direct investment rules prevent overseas groups owning more than 74 per cent of domestic companies.

People familiar with the situation said Essar could decide to sell its 33 per cent stake rather than be a partner. Vodafone would pay it $5.7bn.

One person with knowledge of the situation said Reliance, Essar and the Hinduja group had been asked if they wanted to top Vodafone’s bid. They declined, added the person. Hutchison Whampoa declined to comment.

The acquisition, which is expected to be completed in the second quarter, will take the share of Vodafone’s operating income accounted for by eastern Europe, the Middle East, Africa, Asia-Pacific and affiliates from 20 per cent this year to over one third by 2012, based on projections for the rate of market growth in India.

Sir John Bond, chairman, said: “India is destined to become one of the largest and most important mobile markets in the world and this acquisition will enable our shareholders to benefit from our increased investment in this market.”

India is the world’s fastest growing mobile phone market with an additional 6.5m net new subscribers in the last quarter. Market penetration is expected to reach 40 per cent by 2012 and Vodafone is targeting a 20-25 per cent share. With 22.3m customers at present, Hutch Essar has a 16.4 per cent share.

Vodafone was advised by UBS, while Goldman Sachs advised Hutchison.