Vodafone unlikely to deter suitors with Indian take over

Vodafone's move to take full control of its Indian subsidiary is unlikely to deter potential suitors that are eying an acquisition of the UK-based group, a leading Ovum analyst said.

Vodafone CEO Vittorio Colao

Vodafone CEO, Vittorio Colao

Steven Hartley, practice leader for industry communications and broadband at the research company, told FierceWireless:Europe that Vodafone's move in India is more about boosting its balance sheet than closing the door on a potential take over.

Vodafone confirmed on Friday that it has acquired a 10.97 per cent stake in Vodafone India from pharmaceutical company Piramal Enterprises. Combined with smaller stake increases in March, the move gives Vodafone 100 per cent ownership of the Indian operator, for a price of 101.41 billion rupees (€1.2 billion/$1.6 billion).

Hartley said the move allows Vodafone to fully consolidate the results of the Indian business into group earnings. "In the absence of Verizon to drive revenue growth at Vodafone Group, you can view full consolidation as means of boosting group performance," he noted, adding that India "has the potential to offer growth to the group more than most other markets in the Vodafone footprint."

Hartley also said the Indian acquisition would not put off companies seeking to acquire Vodafone Group. "[Y]ou could just as easily argue that by simplifying the ownership structure they're actually making the group easier to acquire," Hartley said.

Hartley added a caveat by noting that talk of a Vodafone takeover is just rumour at this stage.

Reports earlier this week said Japanese operator SoftBank is eyeing an acquisition of Vodafone Group, despite scepticism among bankers about SoftBank's ability to finance such a take over.

Financial newspaper Barron's reported Vodafone is a good investment target for U.S. investors seeking exposure to European telecoms.

One analyst told Barron's that AT&T could re-emerge as a potential buyer for Vodafone. The U.S. operator was forced to deny it planned to make an offer for Vodafone in a statement to the London Stock Exchange in January, which rules AT&T out of making an offer for six months.

Vodafone's move in India makes it the first company to make use of a relaxation in local laws regarding foreign ownership of Indian companies. Previously, overseas firms' direct stake in Indian companies was restricted to a maximum of 74 per cent.

The company recently settled a capital gains tax dispute with Indian authorities relating to its 2007 acquisition of Hutchison Essar--which became Vodafone India.

Vodafone's Indian acquisition is its second in recent weeks, after it agreed a deal to acquire Spanish broadband provider Ono for €7.2 billion ($10 billion). The company is currently flush with cash after selling its 45 per cent stake in U.S. operator Verizon Wireless for $130 billion (€93.6 billion) in February, and is looking to spend some of the proceeds on acquisitions.

Vittorio Colao, Vodafone's CEO, recently also said the company could look to acquire a cable operator in Portugal.

For more:
- see Vodafone's announcement

Related Articles:
Rumour Mill: SoftBank eyes Vodafone as part of wider European M&A probe
Barron's: Vodafone an appealing prospect for U.S. investors
Vodafone confirms Ono acquisition for €7.2B
Vodafone CEO rules in cable buys in Portugal
Vodafone enters post-Verizon era at half its market value
Vodafone given green light to increase India unit stake

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