A Vodafone spokesman declined to comment. Indian newspapers reported on Wednesday that Vodafone was exploring options for a bid for Hutchison Essar to expand in the world's fastest growing cellular services market.
This could include selling its stake in top mobile services firm Bharti Airtel, India's Economic Times said.
A bid of $13.5-$14 billion could value Hutchison Essar at a 24% premium to Bharti, which has a market capitalization of $25.7 billion, CLSA said in a client note.
At $14 billion, analysts estimate Hutchison Essar's enterprise value/EBITDA at 20.6 times year-to-March 2007 earnings, well above Bharti's 16.2 times.
India's GSM carriers reported a record 5 million new subscribers in November, including more than 1 million for Hutchison, taking total users in the country beyond 143 million.
Hutchison is the fourth-largest wireless operator in India with a 16% market share, behind Bharti's 21.5%, Reliance's 20.4% and state-run Bharat Sanchar Nigam's 16.5%.
Hutchison Essar is 67%-owned by Hong Kong tycoon Li Ka-shing's Hutchison Telecommunications International.
India's Essar group, which holds the remainder, has first right of refusal if Hutchison decides to exit.
The FT said Vodafone executives were to decide whether to pursue what would be the largest offer to buy an Indian firm, and planned to offer a bid to Canning Fok, managing director of Hutchison Whampoa, and Ravi Ruia, vice-chairman of Essar, in London on Friday.
Citing an unnamed banker familiar with the situation, the FT said such a move would likely prompt a counteroffer from Reliance.
A person close to Reliance Communications, which the FT said had joined forces with private equity houses including Blackstone to consider an offer for Hutchison's stake, was quoted as saying the company was monitoring developments, but had not yet decided to make a formal bid.
"We also believe that in the ongoing bidding war Reliance Communication carries the risk of paying (a) significant valuation premium for Hutch Essar," CLSA said.
Macquarie Securities estimated Hutchison Essar's enterprise value at $13.7 billion, with an equity value of $12.18 billion.
Indian newspapers also said Malaysia's Maxis Communications -- which last year bought 74 percent in India's Aircel -- and Egypt's Orascom Telecom were potential suitors.
Hutchison is attracting interest due to its high revenue per user.
CLSA estimates its average revenue per user (ARPU) at 420 rupees ($9.4) a month, against an average 366 rupees for all providers. In comparison, Reliance has an ARPU of 354 rupees, while Bharti leads with 438 rupees, it said.
JM Morgan Stanley, the Indian unit of Morgan Stanley, is advising Essar and has also committed some investment if a few investors join Essar in buying out Hutchison, an investment banker said.