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Vodafone India gets Rs.477 bln to ramp up telecom war

Will use the funds to strengthen its spectrum portfolio and network roll-out, and retire debt.

Days before the spectrum auction commences, British telecom major Vodafone Group has infused Rs 477 billion fresh equity capital in its Indian arm - the largest-ever foreign direct investment in rupee terms in the country. The money has been received already and Vodafone India, the country's second-largest telecom operator after Bharti Airtel, will use the funds to strengthen its spectrum portfolio and network roll-out, and retire debt.

Commenting on the capital infusion, Sunil Sood, chief executive officer of Vodafone India, said: "This reaffirms our commitment to India. With this, we will focus on right-sizing our spectrum portfolio and deployment of 4G and 5G technology."

The company also announced that its subscriber base had touched 200 million subscribers.

Last November, Vodafone Group had invested Rs 130 billion in the Indian arm for network rollout. This was, however, dwarfed by Bharti Airtel, which had announced an investment of Rs.600 billion to ramp up its network.

The government is putting 2,354.55 megahertz of spectrum at the auction table, giving an opportunity to operators such as Vodafone to strengthen their spectrum holdings. Vodafone is expected to be one of the strongest bidders during the spectrum auction with analysts predicting that it could spend as much as Rs 163 billion on buying airwaves.

Vodafone's spectrum portfolio will need to be fortified significantly, if the company is serious about its India ambitions, as it lacks broadband spectrum in many of its circles. Currently, Vodafone has spectrum to offer 2G voice in all the 22 circles, but has 3G spectrum in 15 circles and 4G in nine circles. Bharti has 2G, 3G and 4G spectrum in all 22 circles, except Kerala, where it needs 3G spectrum.

Vodafone closely competes with Bharti Airtel and is perceived as a premium brand; it has a revenue market share of 22.5 per cent. Sood said: "With our commitment to support the Digital India vision, we are building one of the most modern and scalable telecom networks to deliver connectivity."

Reliance Jio recently stormed the market with free calls and competitive data tariffs, pressuring existing telecom operators to rethink their strategies to protect their market share.

Vodafone India's revenues grew by a modest five per cent in FY16 to Rs 443.03 billion, thanks to the impact of lower interconnect and roaming charges. The standalone debt of the telco for 2015-16 stood at Rs 815 billion.

The new telecom war and the fresh equity injection in Vodafone India has raised speculation that the Newbury, England-based parent may delay taking its local arm public.

Declining to give a timeline for its debut in the primary market, the company's India management merely said that it "continues to prepare" for a potential listing. Analysts said that Vodafone has pushed the timeline further into the future on concerns over the local arm's valuations in the wake of Reliance Jio's disruptive pricing and its impact on the industry's business model. And so, the parent has injected funds in the interim period, they added.

According to market estimates, Vodafone India is looking to raise between $2 billion and $3 billion through an IPO, which would potentially be the biggest in the country.

Meanwhile, Vodafone India has rejigged its leadership structure by halving the number of operations directors from four to two to speed up decision-making, hasten its goto-markets strategy and optimise resources at a time when competition has increased with Reliance Jio Infocomm's entry.

The removal of a senior managerial layer between the COO and the business heads of Vodafone's biggest 'direct' markets was aimed at greater agility in decision-making and decision translation, a senior company executive said.

From Business Standard, Economic Times and Business Line

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