By -
May 21, 2014
Vodafone Group Plc (VOD) is poised to claim
more revenue from India than the U.K. in the coming years, a
first for the British mobile-phone company.
India already commanded the largest share of the carrier’s subscribers and voice calls, and data usage has surpassed any other division. That means the country could overtake the U.K. and Italy in the next few years by revenue, according to Marten Pieters, Vodafone’s chief executive officer for India.
“We are already bigger than Germany in terms of data, which is amazing,” Pieters said this week. “We grow that by combining smartphone sales with cheap data packets.”
A boom in data demand has helped the Indian unit win one of the earliest cash infusions from Vodafone’s two-year, 19 billion-pound ($32 billion) global network improvement program. Vodafone said it was able to raise prices last year in the frenetic Indian market, where users often swap plans when a better deal comes up. That’s something the company isn’t able to do in much of Europe.
The investment in India will help cover 95 percent of the country with third-generation wireless technology by 2016, allowing smartphones to access the Internet and download music and video. Vodafone’s market share has plenty of room to grow, and that means “actively approaching smartphone users that don’t use data,” Pieters said.
Vodafone CEO Vittorio Colao has used India as a way to offset losses from shrinking European markets. He took advantage of relaxed rules on foreign ownership to buy out other investors in the Indian unit to bring the holding to 100 percent last month.
While Vodafone’s service revenue in India jumped 13 percent last year, Europe declined 9.1 percent. India is the fastest-growing smartphone market after China, according to researcher International Data Corp. The country is also a vehicle for Vodafone’s mobile payment platform M-Pesa, which will be introduced nationwide by the end of the year.
Vodafone has 167 million subscribers in India, compared with 65 million at the South Africa-based business, its second largest, and 32 million in Germany, the biggest by revenue.
Bharti Airtel Ltd., the biggest wireless provider in India by subscribers, had 22.7 percent of the market in March, up from 22.2 percent six months earlier, according to the Telecom Regulatory Authority of India. Vodafone boosted its share to 18.4 percent from 17.9 percent.
One potential stumbling block in India is a long-running dispute with the government over a tax bill stemming from the 2007 purchase of Hutchison Whampoa Ltd.’s Indian assets. More than $2 billion is at stake. Vodafone said it didn’t owe taxes because the acquisition was between two foreign companies. India countered with a law enabling it to retroactively tax cross-border deals.
The dispute hasn’t prevented Vodafone from investing more in the country. It agreed in February to spend 1.9 billion pounds on spectrum licenses.
There’s not nearly enough spectrum in major markets like Mumbai to carry calls and data, making it difficult to maintain network quality, Pieters said. Vodafone would like three or four times the current amount and will need the amount doubled to 10 megahertz “very soon” to keep up with growth.
“Nobody in the world has ever done this on 5 megahertz,” he said. “My colleagues in Vodafone, if they hear what we do, they really don’t understand how we do it.”
To pay for the global network improvement plan, Vodafone is using cash it pocketed from its $130 billion sale of its stake in U.S. mobile company Verizon Wireless last year, a deal that has turned Vodafone itself into a takeover target.
Until then, Colao will have to continue to rely on India as what he called this week “one of the two or three great pillars” of the company.
“India was always lagging behind the rest of the emerging markets in terms of data usage because of low penetration of smartphones and perceived quality of 3G,” said Anand Kulkarni, a telecom analyst at Care Research in Mumbai. “With the growth of smartphones, obviously there is a lot of potential.”
To contact the reporters on this story: Amy Thomson in London at athomson6@bloomberg.net; Bianca Vázquez Toness in New Delhi at btoness@bloomberg.net
To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Michael Tighe at mtighe4@bloomberg.net David Risser
India already commanded the largest share of the carrier’s subscribers and voice calls, and data usage has surpassed any other division. That means the country could overtake the U.K. and Italy in the next few years by revenue, according to Marten Pieters, Vodafone’s chief executive officer for India.
“We are already bigger than Germany in terms of data, which is amazing,” Pieters said this week. “We grow that by combining smartphone sales with cheap data packets.”
A boom in data demand has helped the Indian unit win one of the earliest cash infusions from Vodafone’s two-year, 19 billion-pound ($32 billion) global network improvement program. Vodafone said it was able to raise prices last year in the frenetic Indian market, where users often swap plans when a better deal comes up. That’s something the company isn’t able to do in much of Europe.
The investment in India will help cover 95 percent of the country with third-generation wireless technology by 2016, allowing smartphones to access the Internet and download music and video. Vodafone’s market share has plenty of room to grow, and that means “actively approaching smartphone users that don’t use data,” Pieters said.
Low Penetration
Of Vodafone’s 52 million Indian customers on data plans, just 7 million use the faster 3G network. The country had 405 million mobile users last year, or 32 percent of its population of about 1.26 billion, according to industry association GSMA. There are about twice as many mobile connections as customers switch between phones, compared with a 132 percent penetration rate in Europe.Vodafone CEO Vittorio Colao has used India as a way to offset losses from shrinking European markets. He took advantage of relaxed rules on foreign ownership to buy out other investors in the Indian unit to bring the holding to 100 percent last month.
While Vodafone’s service revenue in India jumped 13 percent last year, Europe declined 9.1 percent. India is the fastest-growing smartphone market after China, according to researcher International Data Corp. The country is also a vehicle for Vodafone’s mobile payment platform M-Pesa, which will be introduced nationwide by the end of the year.
Price Increases
Unlike in the U.K. and Germany, there may be room to keep increasing prices in India, despite a plethora of providers. India’s tariffs remain among the lowest in the world, according to Nitin Soni, director of Asia-Pacific corporate ratings at Fitch Ratings.Vodafone has 167 million subscribers in India, compared with 65 million at the South Africa-based business, its second largest, and 32 million in Germany, the biggest by revenue.
Bharti Airtel Ltd., the biggest wireless provider in India by subscribers, had 22.7 percent of the market in March, up from 22.2 percent six months earlier, according to the Telecom Regulatory Authority of India. Vodafone boosted its share to 18.4 percent from 17.9 percent.
One potential stumbling block in India is a long-running dispute with the government over a tax bill stemming from the 2007 purchase of Hutchison Whampoa Ltd.’s Indian assets. More than $2 billion is at stake. Vodafone said it didn’t owe taxes because the acquisition was between two foreign companies. India countered with a law enabling it to retroactively tax cross-border deals.
Tax Dispute
Vodafone has started international arbitration, and the case will be decided by an impartial court, it said this month.The dispute hasn’t prevented Vodafone from investing more in the country. It agreed in February to spend 1.9 billion pounds on spectrum licenses.
There’s not nearly enough spectrum in major markets like Mumbai to carry calls and data, making it difficult to maintain network quality, Pieters said. Vodafone would like three or four times the current amount and will need the amount doubled to 10 megahertz “very soon” to keep up with growth.
“Nobody in the world has ever done this on 5 megahertz,” he said. “My colleagues in Vodafone, if they hear what we do, they really don’t understand how we do it.”
To pay for the global network improvement plan, Vodafone is using cash it pocketed from its $130 billion sale of its stake in U.S. mobile company Verizon Wireless last year, a deal that has turned Vodafone itself into a takeover target.
AT&T Wait
AT&T Inc. has been interested in buying the U.K. company since at least last year, according to people familiar with the plans. Still, AT&T’s agreement this week to buy U.S. satellite TV provider DirecTV for $48.5 billion is the latest sign that AT&T may set aside a long-held ambition of making a big takeover in Europe.Until then, Colao will have to continue to rely on India as what he called this week “one of the two or three great pillars” of the company.
“India was always lagging behind the rest of the emerging markets in terms of data usage because of low penetration of smartphones and perceived quality of 3G,” said Anand Kulkarni, a telecom analyst at Care Research in Mumbai. “With the growth of smartphones, obviously there is a lot of potential.”
To contact the reporters on this story: Amy Thomson in London at athomson6@bloomberg.net; Bianca Vázquez Toness in New Delhi at btoness@bloomberg.net
To contact the editors responsible for this story: Kenneth Wong at kwong11@bloomberg.net; Michael Tighe at mtighe4@bloomberg.net David Risser
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