Vodafone India

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Vodafone India

Type

Private (subsidiary of Vodafone International Holdings BV(VIH) )

Industry

Telecommunications

Predecessor(s) Hutchison Essar

Founded

1994

Headquarters

Mumbai, Maharashtra, India

Products

Mobile telephony Wireless broadbandservices

Parent

Vodafone Group

Website

www.vodafone.in www.vodafone.com

Vodafone India, formerly Vodafone Essar and Hutchison Essar, is the third largest mobile network operator in India after Airtel and Reliance Communications. It is based in Mumbai, Maharashtra and which operates nationally.
[1]

It has approximately 146.84 million customers as of November 2011.

On July 2011, Vodafone Group agreed terms for the buy-out of its partner Essar from its Indian mobile phone business. The UK firm paid $5.46 billion to its Indian counterpart to take Essar out of its 33% stake in the Indian subsidiary. It will leave Vodafone owning 74% of the Indian business, while the other 26% will be owned by Indian investors, in compliance with Indian law.[2] On 11 February, 2007, Vodafone agreed to acquire the controlling interest of 67% held byLi Ka Shing Holdings in Hutch-Essar for US$11.1 billion, pipping Reliance Communications, Hinduja Group, and Essar Group, which is the owner of the remaining 33%. The whole company was valued at USD 18.8 billion.[3] The transaction closed on 8 May, 2007. It offers both prepaid and postpaid GSMcellular phone coverage throughout India with good presence in the metros. Vodafone India provides 2.75G services based on 900 MHz and 1800 MHz digital GSM technology. Vodafone India launched 3G services in the country in the January-March quarter of 2011 and plans to spend up to $500 million within two years on its 3G networks. [4]

Contents
[hide]

1 History
o

1.1 Hutchison Essar (1992-2007)



1.1.1 Timeline

o o

1.2 Vodafone acquires Essar's Stake 1.3 Vodafone-Hutchison Tax Case

2 3G 3 Subscriber Base
o

3.1 Inactive Subscribers

4 Competitors 5 Awards and recognition 6 See also 7 References 8 External links

[edit]History [edit]Hutchison

Essar (1992-2007)

In 1992, Hutchison Whampoa and its Indian business partner Max Group, established a company that in 1994 was awarded a licence to provide mobile telecommunications services in Bombay (nowMumbai) and launched commercial services as Hutchison Max in November 1995. In Delhi, Uttar Pradesh (East), Rajasthan and Haryana, Essar Group was the major partner. But later Hutch took the majority stake.

By the time of Hutchison Telecom's Initial Public Offering in 2004, Hutchison Whampoa had acquired interests in six mobile telecommunications operators providing service in 13 of India's 23 licence areas and following the completion of the acquisition of BPL Mobile that number increased to 16. In 2006, it announced the acquisition of a company (Essar Spacetel A subsidiary of Essar Group) that held licence applications for the seven remaining licence areas. Initially, the company grew its business in the largest wireless markets in India in cities like Mumbai, Delhi and Kolkata. In these densely populated urban areas it was able to establish a robust network, well known brand and large distribution network all vital to long-term success in India. Then it also targeted business users and high-end post-paid customers which helped Hutchison Essar to consistently generate a higher Average Revenue Per User (ARPU) than its competitors. By adopting this focused growth plan, it was able to establish leading positions in India's largest markets providing the resources to expand its footprint nationwide. In February 2007, Hutchison Telecom announced that it had entered into a binding agreement with a subsidiary of Vodafone Group Plc to sell its 67% direct and indirect equity and loan interests in Hutchison Essar Limited for a total cash consideration (before costs, expenses and interests) of approximately $11.1 billion. Hutch was often praised for its award winning advertisements which all follow a clean, minimalist look. A recurrent theme is that its message "Hi" stands out visibly though it uses only white letters on red background. Another successful ad campaign in 2003 featured a pug named Cheeka following a boy around in unlikely places, with the tagline, "Wherever you go, our network follows." The simple yet powerful advertisement campaigns won it many admirers. Ads featuring the pug were continued by Vodafone even after rebranding. The brand subsequently introduced ZooZoos which gained even higher popularity than was created by the Pug. Vodafone's creative agency is O&M while Harit Nagpal was the Marketing Director during the various phases of it's brand evolution.

[edit]Timeline
1992: Hutchison Whampoa and Max Group establish Hutchison Max 2000: Acquisition of Delhi operations and entry into Calcutta (now Kolkata) and Gujarat markets through Essar acquisition 2001: Won auction for licences to operate GSM services in Karnataka, Andhra Pradesh and Chennai

A 'You and I' print advertisement of Hutch featuringCheeka (dog) 2003: Acquired AirCel Digilink (ADIL ESSAR Subsidiary) which operated in Rajastan, Uttar Pradesh East and Haryana telecom circles and rebranded it 'Hutch'. 2004: Launched in three additional telecom circles of India namely Punjab, Uttar Pradesh (West) and West Bengal. 2005: Acquired BPL Mobile operations in 3 circles. This left BPL with operations only in Mumbai, where it still operates under the brand 'Loop Mobile'. 2007: Vodafone acquires a 67% stake in Hutchison Essar for $10.7 billion. The company is renamed Vodafone Essar. 'Hutch' is rebranded to 'Vodafone'. 2008: Vodafone acquires the licences in remaining 7 circles and has starts its pending operations in Madhya Pradesh circle, as well as in Orissa, Assam, North East and Bihar. 2011: Vodafone Group buys out its partner Essar from its Indian mobile phone business. It paid $5.46 billion to take Essar out of its 33% stake in the Indian subsidiary. It left Vodafone owning 74% of the Indian business.

[edit]Vodafone

acquires Essar's Stake

On March 31, 2011, Vodafone Group Plc announced that it would buy an additional 33% stake in its Indian joint venture for $5 billion after partner Essar Groupexercised an option to sell the holding in the mobilephone operator. The deal will raise Vodafones stake to 75%. Essar will exit the company after it implemented aput option over 22% of the venture. Vodafone exercised its call option to buy an 11% stake. [5] In 2007, Vodafone granted options to Essar that would enable the conglomerate to sell its entire stake for $5bn, or to dispose of part of the 33 per cent shareholding at an independently appraised fair market value. In January 2011, Vodafone objected to Essars plans to place part of its 33% stake in India Securities, a small public company. Vodafone feared the move would give an inflated market value to Vodafone Essar. [6] It had approached the market regulator SEBI and also filed a petition in the Madras High Court.

The final shareholding pattern post this deal was not provided by the company as it was not clear whether Vodafone's stake would exceed the 74 per cent FDI limit. Indian laws don't allow foreign companies to own more than 74% in a local mobile-phone operator. Vodafone has assured it will comply with local rules. Vodafone will have to sell that 1% to some Indian entity, or theyll have to consider an initial public offering. Vodafone also said that final settlement is anticipated to be completed by November 2011. The completion of the deal would be subject to meeting certain conditions which include Reserve Bank of India's permission as well as valuation of the deal.[7]

[edit]Vodafone-Hutchison

Tax Case

Vodafone was embroiled in a $2.5 billion tax dispute with the Indian Income Tax Department over its purchase of Hutshison Essar Telecom services in April 2007. It was being alleged by the Indian Tax authorities that the transaction involved purchase of assets of an Indian Company, and therefore the transaction, or part thereof was liable to be taxed in India. [8] Vodafone Group Plc. entered India in 2007 through a subsidiary based in the Netherlands, which acquired Hutchison Telecommunications International Ltds (HTIL) Hutchison Telecommunications International Limited stake in Hutchison Essar Ltd (HEL)the joint venture that held and operated telecom licences in India. This Cayman Islands transaction, along with several related agreements, gave Vodafone control over 67% of HEL and extinguished Hong Kong-based Hutchisons rights of control in India, a deal that cost the worlds largest telco $11.2 billion at the time.[9] The crux of the dispute had been whether or not the Indian Income Tax Department has jurisdiction over the transaction. Vodafone had maintained from the outset that it is not liable to pay tax in India, and even if tax were somehow payable, then it should be Hutchison to bear the tax liability. In January 2012, the Indian Supreme Court passed the judgement in favor of Vodafone, saying that the Indian Income tax department had "no jurisdiction" to levy tax on overseas transaction between companies incorporated outside India.[10]

[edit]3G
On 19 May 2010, the 3G spectrum auction in India ended. Vodafone paid 11617.86 million (the second

highest amount in the auctions) for spectrum in 10 circles. The circles it will provide 3G in areDelhi, Kanpur, Gujarat, Haryana, Kolkata, Maharashtra & Goa, Mumbai, Tamil Nadu, Uttar Pradesh (East) and West Bengal.[11] Vodafone also operates 3G services in Kerala, Andhra Pradesh and Uttar Pradesh (West) through an agreement with Idea and in Karnataka through an agreement with Airtel.. This gives Vodafone a 3G presence in 13 out of 22 circles in India. On 16 March, 2011, Vodafone launched 3G services in Uttar Pradesh (East) in the city of Lucknow.[12] Vodafone had already launched limited 3G services in Chennai and Delhi earlier, but the Uttar Pradesh (East) launch counts as its first fully commercial launch. This makes Vodafone the fifth

private operator (seventh overall) to launch its 3G services in the country following Tata Docomo,Reliance Communications, Airtel and Aircel. On 23rd June, 2011 Vodafone launched 3G service in Kerala by joining with Idea in an Intra Circle Roaming agreement. Initially Vodafone 3G services will be available in the following cities in Kerala Ernakulam, Aluva, Calicut, Koyilandy, Alappuzha, Cherthala, Malappuram and Manjeri.

[edit]Subscriber

Base

Following is the Vodafone India subscriber base statistics as on June 2011.[13]

Subscriber Base Statistics as on January, 2011

Telecom Cicle

No. of Subscribers

Gujarat

1,49,10,573

Uttar Pradesh(East)

1,42,37,217

Maharashtra

1,19,62,824

West Bengal

1,10,40,815

Tamil Nadu

93,30,557

Rajasthan

87,11,277

Uttar Pradesh(West)

92,34,369

Andhra Pradesh

73,47,024

Delhi

77,88,376

Kanpur

71,34,576

Subscriber Base Statistics as on January, 2011

Telecom Cicle

No. of Subscribers

KARNATAKA

65,91,039

Kerala

55,35,177

Bihar

52,44,148

Kolkata

43,73,647

Punjab

41,32,392

Haryana

41,70,943

Madhya Pradesh

31,35,580

Chennai

21,13,992

Orissa

23,38,159

Assam

16,50,109

North East

8,61,826

Jammu & Kashmir

5,65,253

Himachal Pradesh

3,57,430

Mumbai

58,87,113

Total number of Vodafone India Subscribers : 14,15,19,840, i.e. 23.63% of the total 59,87,79,674 Indian mobile phone subscribers. Source : http://coai.in/statistics.php

[edit]Inactive

Subscribers

On 19 December 2011, Vodafone said it would discontinue mobile services of prepaid customers whose connections are lying unused with no voice calls (incoming or outgoing), SMS and data usage for any continuous period of 60 days. This guideline has been implemented because the Department of Telecommunications' stringent guideline for allocation of new number series based on subscribers in VLR (visitor location register) has created acute shortage of numbers, for any telecom company, Vodafone said in a statement. The mobile operator further said that new customers would be intimated of the deactivation process in their starter kits, while existing customers would be informed via SMS and outbound calls, wherever possible. [14] As per industry estimates, around 25% of the total subscriber base is lying unused. DoT has asked mobile operators to screen their users and allocate unused numbers to new subscribers.

[edit]Competitors
Vodafone competes with 14 other mobile operators throughout India. They are Aircel, Airtel, Cheers Mobile, BSNL, Idea, Loop Mobile, MTNL, MTS, Ping Mobile, Reliance Communications, S Tel, Tata DoCoMo, Tata Indicom, Uninor, Videocon and Virgin Mobile.

[edit]Awards

and recognition

The Brand Trust Report,[15] 2011 published by Trust Research Advisory has ranked Vodafone[16] as the 16th most trusted brand in India.

Wherever you go, the network follows! Hutchs famous punch line which was adapted appropriately in its much loved advertisement turned out to be quite a pun as the Merger&Acquisition bug followed and finally caught up with Hutch! Following an entire battle of give and take, Vodafone acquired Hutch for a whopping 10 billion USD! Most of us would be wondering, that why at all a company should acquire a rival? What are the gains and risks involved in the entire transaction and how are mergers different from acquisitions? A Merger, as the name suggests occurs when two companies go ahead and merge into a bigger company, mostly under a different name. This is

often a result of stock swap, which takes place when two companies agree to share the risks involved in the deal. A merger might resemble an acquisition, it is indeed quite similar, but it is named so in most cases due to political and marketing reasons to avoid media frenzy. Well, obviously a company acquires the other or two companies merge together to accelerate their growth without having to create a separate business entity. An acquisition, as opposed to a merger, can be friendly or hostile. If a company buys the shares of the other company without prior knowledge, it is a hostile takeover. However if both companies cooperate and reach at a final stand, an acquisition can be friendly. Coming back to the Hutch and Vodafone instance, which was a friendly acquisition, it is seen that a lot of expenditure is involved in such deals. When a company decides to take over the other, several factors need to be kept in mind. Considering that such actions are taken to increase the popularity, growth and market reach of a brand, one has to be aware of the consequences of the deal. How much technological know-how and expertise exists with the company to actually go ahead and ensure such a process. Mergers and acquisitions are an important part of brand building. It could also show how powerful you are as compared to your rival. There are thus several motives behind merger and acquisitions, some of them being, economies of scale which refer to the fact that two companies merge together, they actually reduce the costs incurred to the same revenue stream thus increasing their overall profits. Companies also increase their brand value and market share by taking over a rival. A profitable company can buy a loss maker to use the targets loss as their advantage by reducing their tax liability. In the United States and many other countries, rules are in place to limit the ability of profitable companies to shop for loss making companies, limiting the tax motive of an acquiring company. Another important factor that comes into play is the geographical diversification: This is designed to smooth the earnings results of a company, which over the long term smoothens the stock price of a company, giving conservative investors more confidence in investing in the company. However, this does not always deliver value to shareholders. Accurate business valuation is one of the most important aspects of M&A as valuations like these will have a major impact on the price that a

business will be sold for. No marketplace currently exists for the mergers and acquisitions of privately owned small to mid-sized companies. Market participants often wish to maintain a level of secrecy about their efforts to buy or sell such companies. Their concern for secrecy usually arises from the possible negative reactions a companys employees, bankers, suppliers, customers and others might have if the effort or interest to seek a transaction were to become known. Thus need for secrecy has thwarted the emergence of a public forum or marketplace to serve as a clearinghouse for this large volume of business. Thus, in this method of give and take, it always remains to be seen how well planned the move was but in the end it is the market that the decider. Surbhi Bhatia