Vodafone continued its spending spree in India after the operator won spectrum licences at a cost of around $3 billion following the conclusion of an auction that raised a total of about 611.62 billion rupees ($9.8 billion or €7.2 billion)--much more than expected--for the Indian government.
Vodafone India was one of eight companies to bid for spectrum in the 900 MHz and 1800 MHz bands, along with Telenor's Indian unit, Bharti Airtel, Idea Cellular, Reliance Communications and others.
However, Vodafone India and other companies have criticised the high fees that they have to pay to secure the spectrum, at a time when India's economic environment for foreign companies is already under scrutiny due to the government's dealings with Vodafone and Nokia over their respective tax disputes.
Vodafone spent 196 billion rupees to win back its existing licences in Mumbai, Delhi and Kolkata, and gain airwaves in other markets.
"We are pleased to have secured our business for the next 20 years in three of our most important circles by buying enough spectrum to continue our successful journey," Marten Pieters, chief executive of Vodafone India, stated. "We have also opened the door to the next generation of mobile technology--4G--by acquiring 1800 [MHz] spectrum in the places where we expect this market to take off first. Vodafone Mumbai is the only operator in India to have data capabilities on all the commercial spectrum bands: 3G on 900 MHz and 2100 MHz and 4G on 1800 MHz."
However, Pieters added that the higher-than-expected bidding risked damaging India's telecoms sector, which is already grappling with high debt.
"The auction has raised over 61,000 crores [$9.8 billion] for the government, but much of this will end up as debt on the balance sheets of the mobile operators. Such high industry indebtedness will hurt operators' ability to invest in the rollout of new technologies and invariably result in higher prices and reduced service levels for consumers," Pieters said.
Vodafone's relationship with the Indian government had already taken a turn for the worse this week after Indian Finance Minister P. Chidambaram accused the company of being "inflexible" in negotiations to try and resolve a long-running tax dispute, according to the Wall Street Journal. India says it is owed more than $2 billion--some reports put the total amount at $2.6 billion--by Vodafone in back taxes relating to the company's 2007 acquisition of Hutchison Essar.
Despite the damaging tax dispute India is clearly too important a market for Vodafone to ignore: as well as spending billions on new spectrum licences, the group recently gained government approval to increase its stake in Vodafone India to 100 per cent at a cost of around $1.6 billion, and is also 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.
Vodafone recently revealed that it achieved 13.2 per cent organic revenue growth in India in its fiscal third quarter, compared to an almost 10 per cent decline in European service revenue.
Meanwhile Indian newspaper the Economic Times reported that Nokia has appealed to India's Supreme Court after the Delhi High Court imposed new conditions stalling the transfer of its plant in Chennai to Microsoft as part of the U.S.-based company's acquisition of Nokia's devices and services unit.
For more:
- see the provisional Indian auction results
- see this Financial Times article (sub. req.)
- see this Reuters article
- see this Wall Street Journal article (sub. req.)
- see this separate Wall Street Journal article (sub. req.)
- see this Bloomberg article
- see this separate Reuters article
- see this separate Financial Times article (sub. req.)
- see this Economic Times article
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