Vodafone Takes 100% Indian Ownership in Time for Next License Round

Vodafone CEO Vittorio Colao moved a step closer to achieving his plan to have 100% control over the group's worldwide networks with the announcement it is acquiring the remaining 11% of Vodafone India it did not own.

The announcement came only days before TRAI (Telecoms Regulatory Authority of India) and India's Department of Telecommunications (DoT) announced plans to start the process of auctioning mobile frequencies in several regions where the licences of existing telecom operators are coming up for renewal over the next two years.

The decision to buy out minority shareholders in India has been subject to extensive political and regulatory scrutiny, partly as a consequence of the long running tax dispute the company has been embroiled with the Indian tax authorities. In February it won approval to take full control, crucially ahead of India’s lengthy general election. This has still not prevented adverse comment in Indian media since the latest deal was announced.

The agreement has cost Vodafone an estimated US$1.4BN. The vendor, pharmaceuticals tycoon and one of the country’s richest men, Ajay Piramal, built his stake two years ago and has made a 50% return on the deal.

Commenting on the purchase Colao said: "We are delighted to have secured 100% ownership of one of our fastest-growing businesses. Vodafone is strongly committed to India and we have invested significantly over many years to bring communications to millions of people for the first time. Our business will continue to connect communities and offer the best products and services - from entertainment to our innovative money transfer service, M-Pesa - to enhance the lives of Indians throughout the country."

Since Vodafone acquired its original interest in India from Hutchison in 2007, its customer base has grown around 550% - from 30 million to just over 164 million customers. The group operates in all 22 circles, providing employment directly or indirectly to nearly 100,000 people across the country.

A number of Vodafone India's current permits are due for renewal in the latest round of auctions. According to the DoT a total of 29 permits are due for renewal between December 2015 and April 2016. Other affected operators include Bharti Airtel, Idea Cellular and Reliance Communications. The permits due to be renewed cover high population circles such as Andhra Pradesh, Karnataka, Maharashtra and Bihar so competition is expected to be fierce, particularly in the efficient 900 MHz band.

Overall a total of 211.8 MHz is likely to be available, 184 units in the 900 MHz band and 27.8 units in the 1800 MHz band. In the auctions concluded in February 2014, the reserve price for the 1800 MHz band was 25% lower than the price set in the previous auction rounds in November 2012 and March 2013. The reserve price for 900 MHz band was half the earlier rate although strong bidding drove this price up sharply.

The auction date has not yet been announced and the DoT is now commencing the process of seeking the sector regulator's recommendations on the starting prices. Vodafone is expected to draw on the proceeds of the sale of its US assets to Verizon for more than $130 billion as it seeks to secure it's position as a leading player in one of the world’s fastest-growing mobile markets. Meanwhile, Bharti Airtel has raised billions in loans from overseas markets, including Europe and the US, in order to be able to compete.


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