Vodafone cash infusion, 4G expansion fuel FDI in telecom to an all-time high

At $7.2 billion, FDI inflow was the highest in October, when Vodafone invested Rs47,700 crore, or $7 billion, in its Indian unit, to cut debt and help expansion


Vodafone India had a standalone debt of Rs81,500 crore at the end of 2015-16, and the company used the infusion to trim its debt to Rs35,430 crore. Photo: Reuters
Vodafone India had a standalone debt of Rs81,500 crore at the end of 2015-16, and the company used the infusion to trim its debt to Rs35,430 crore. Photo: Reuters

New Delhi: Foreign direct investment (FDI) in India’s telecom sector crossed $10 billion in the first seven months of the financial year, an all-time high, thanks largely to a mega-investment by Vodafone Plc.

At $7.2 billion, the inflow was the highest in October, when Vodafone invested Rs47,700 crore, or $7 billion, in its Indian unit, to cut debt and help expansion.

“The average FDI in telecom has been about $1.5-2 billion every year and we were expecting about $2 billion (this year). In 2015-16, the investments (foreign) were $1.3 billion, and in the seven months of 2016-17, it has touched $10 billion,” an official in the department of telecom said, requesting anonymity.

Total investment in the telecom sector from April 2000 to September 2016 was $21.16 billion, the official added.

Vodafone India had a standalone debt of Rs81,500 crore at the end of 2015-16, and the company used the infusion to trim its debt to Rs35,430 crore. To be sure, the British parent also wrote down the value of its Indian business by €5 billion (around Rs36,460 crore) on 16 November, citing increased competition in India, a measure that doubled its global first-half loss.

Apart from the Vodafone investment, aggressive tariffs from Reliance Jio Infocomm Ltd since September too have triggered an uptake of the 4G network and investments on the supporting telecom infrastructure by rivals.

After the launch of 4G services in Uttar Pradesh East and West earlier this month, Bharti Airtel Ltd now has 4G presence in 21 of the 22 circles. Vodafone India currently has 4G presence in nine out of 22 circles and recently said it would expand to 17 circles by the end of March 2017. Last week, Idea Cellular Ltd said it will have 20 circles with 4G network by March 2017.

Spectrum auctions concluded in October also fuelled foreign investments. Telcos bid for spectrum worth Rs65,789 crore, buying a total of 965 Mhz of bandwidth.

“The reforms in the sector like spectrum sharing, trading, harmonisation and large-scale spectrum auction have boosted investments. They appear to have increased the confidence of foreign investors,” the government official cited above said.

In August, Singtel (Singapore Telecommunications Ltd) invested $659.51 million for a 7.39% stake in Bharti Telecom Ltd. Singtel already held 39.78% stake in the firm and also directly owned 15.01% share in Airtel through its subsidiaries Pastel Ltd and Viridian Ltd. Bharti Telecom is the holding company of Bharti Airtel Ltd.

Amresh Nandan, research director at Gartner Inc., believes that Jio has definitely had an impact on telcos changing their business strategies. “The investments have primarily been driven by these two companies--Singtel increasing its stake in Bharti and Vodafone Plc. investing in its Indian subsidiary. Bharti is changing its business strategies and Vodafone is undertaking rapid expansion,” Nandan said.

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