Report: Vodafone plots massive deal to become India's biggest operator

Vodafone is reportedly considering a multibillion-euro deal to buy a majority stake in Tata Teleservices in a move that would turn the UK-based operator into the largest telecoms player in India, ahead of current market leader Airtel.

According to Indian newspaper the Economic Times, which cited unnamed sources familiar with the matter, Vodafone is in early talks with the Tata Group to buy its 59.45 per cent controlling stake in the Indian operator. However, the paper noted that NTT DoCoMo, which holds a 26 per cent stake in Tata Teleservices, has the right of first refusal on the stake.

Vodafone is currently flush with cash following the sale last year of its 45 per cent stake in Verizon Wireless for $130 billion (€95.6 billion or £79.2 billion), and has previously said it plans to invest £7 billion ($11.5 billion) over the next two years to strengthen networks and services in major markets and accelerate its strategy of focusing on data, enterprises and emerging markets.

The company has already won approval to increase its stake in Vodafone India to 100 per cent from 64 per cent after India's Foreign Investment Promotion Board approved the move. It was also reported in October that Vodafone plans to invest as much as $2 billion in the country.

Quoting unidentified sources, the Economic Times said Vodafone is ultimately interested in buying out the whole of Tata Teleservices. "Apart from the Tatas and DoCoMo, Vodafone will also look to make an offer to other shareholders," a source told the paper.

The Economic Times noted that if the transaction takes place, a combined Vodafone-Tata Teleservices would become the country's No. 1 player in terms of subscribers with 248 million customers, overtaking Airtel's 196 million.

Vodafone India spokesman declined to comment, according to Bloomberg.

NTT DoCoMo bought its stake in Tata Teleservices in 2009 for around 130 billion rupees (£1.27 billion or €1.54 billion). Based on this, Vodafone's purchase would be likely to run into billions of pounds, although UK newspaper the Daily Telegraph noted that Tata Teleservices is losing money and has high debt.

Vodafone's reported moves come amid efforts by the company to resolve its long-running dispute with the Indian government over tax payments. A report from the Press Trust of India say the company has now submitted its response to a conciliation offer from the government, and has asked for all tax claims against it to be bundled together for settlement.

The Indian Business Standard newspaper earlier reported that Vodafone had been asked to reply by Dec. 31 on the government proposal for a non-binding conciliation to settle a capital gains tax dispute of around $1.8 billion or (€1.3 billion) dispute relating to its Hutchison Essar deal.

Additionally, Reuters previously reported that Vodafone received a separate final tax demand of around $604 million in a so-called transfer pricing dispute linked to its Pune-based outsourcing unit. The Business Standard said the Income Tax Appellate tribunal had since stayed this demand.

Vodafone has now asked for the transfer pricing and capital gains disputes to be dealt with as one case, and is open to further conciliation talks, the reports said.

For more:
- see this Economic Times article
- see this Daily Telegraph article
- see this Bloomberg article
- see this Press Trust of India article

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