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Q3 score: India business rings in 4.2% revenue gain for Vodafone

Q3 score: India business rings in 4.2% revenue gain for Vodafone
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First Published: Sat, Feb 02 2008. 12 15 AM IST

Wide reach: Vodafone CEO Arun Sarin. Vodafone Essar’s share of the Indian market is 17.3%, just behind Bharti Airtel’s and RCom’s. (Photo: Harikrishna Katragadda/Mint)
Wide reach: Vodafone CEO Arun Sarin. Vodafone Essar’s share of the Indian market is 17.3%, just behind Bharti Airtel’s and RCom’s. (Photo: Harikrishna Katragadda/Mint)
Updated: Sat, Feb 02 2008. 12 15 AM IST
New Delhi: India, one of the world’s fastest growing mobile telephony markets, is on its way to becoming the growth engine of Vodafone Group Plc., but the world’s No. 1 mobile telecom company by revenues will face intense competition from incumbents as well as new entrants here.
Wide reach: Vodafone CEO Arun Sarin. Vodafone Essar’s share of the Indian market is 17.3%, just behind Bharti Airtel’s and RCom’s. (Photo: Harikrishna Katragadda/Mint)
Analysts say Vodafone could see as much as 12% of its global revenues coming from the Indian mobile phone market by 2012. On Thursday, the company reported a 4.2% increase in revenues for the third quarter ended December to $18.3 billion (around Rs71,992 crore), helped by almost 56% growth in its India revenues.
India also accounted for almost 38% of the subscribers added by the company in this period. In the three months to December, Vodafone saw its global mobile subscriber base grow by around 10.8 million to 252.3 million. While India contributed 4.2 million to this number, all Europe, including the UK, Germany, Italy and Spain, did 2.58.
“This year, ending March 2008, India is expected to contribute around $3.5 billion (Rs13,758 crore) to Vodafone’s global revenues,” said Jonathan Groocock of UK-based Investec Securities in a telephone interview with Mint on Friday.
In May 2007, Vodafone acquired a 52% stake in India’s Hutchison Essar Ltd for $10.7 billion (Rs4,2061 crore) in order to gain a foothold in the Indian mobile market, which adds around 8 million subscribers every month.
Groocock added that India will account for almost 9.1% of Vodafone’s global revenues in another two years, and contribute around $2.5 billion to the company’s Ebitda (earnings before interest, taxes, depreciation and amortization), a key measure of profitability of a company’s operations.
By September 2007, Vodafone Essar Ltd, the compa-ny’s Indian arm (formerly Hutchison Essar), had overtaken the state-run Bharat Sanchar Nigam Ltd in terms of number of mobile subscribers. As of 31 December, the company’s market share of 17.3% put it behind Bharti AirtelLtd at 23.6% and Reliance Communications Ltd (RCom) at almost 18%.
India has helped Vodafone in other ways too, said an analyst. “India has been crucial in turning around relationship between Vodafone board and its shareholders, who were asking the company to inject growth,” said John Delaney, principal analyst at UK-headquartered Ovum Research, part of Datamonitor Group. .
However, India alone may not ensure a long-term growth for Vodafone, and the company will have to look at other growing markets of China and Bangladesh, Delaney added. “There is a potential opportunity for Vodafone in China, where it already holds around 3% stake in China Mobile.”
Vodafone, much like other telcos in India will face competition in the coming months with as many as nine new companies such as Unitech Ltd and RCom set to offer GSM-based phone services in India. GSM is the dominant wireless technology platform in India
“With aggressive companies such as Reliance Communications set to enter the GSM market, it is going to be a lot more competitive,” said Groocock. “We are yet to factor the new competition in India in our guidance for the company, and I am wary of the competition.”
Reliance, which currently offers mobile telephony services on the CDMA technology platform, recently won government approval for a GSM-based service.
Meanwhile, Vodafone is looking at ways to do business efficiently in India, where mobile telephony tariffs could be as low as 2 cents or 78 paise. In December, Bharti Infratel, Idea Cellular Ltd and Vodafone Essar formed a joint venture called Indus Towers Ltd with some 70,000 towers being shared by the operators in 16 Indian states. “By sharing more telecom infrastructure, Vodafone is looking to offer phone services at lower costs, even as average revenue per user continues to fall,” said Delaney.
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First Published: Sat, Feb 02 2008. 12 15 AM IST
More Topics: Vodafone | Revenue | Competition | Results | Q3 |