With the approval of FIPB and Finance Ministry, the transaction between Hutchison and Vodafone (world’s biggest telecom operator) has been closed. The company will soon be renamed ‘Vodafone Essar’ and the services would be marketed under the Vodafone brand. For Vodafone, India would be its third largest customer base after Germany and US, and possibly having most potential for expansion, as India has only 13% teledensity, while in other countries where Vodafone operates currently are reaching saturation point.
Vodafone has also declared its intention of penetrating the Indian market by announcing to invest $2billion in first year of operations, introducing low-cost handsets to make mobile telephony affordable and infrastructure sharing with Bharti which will include sharing towers, shelter, civil works and back-haul transmission. This sharing would results in savings of around $1 billion over the next five years and accelerate rural coverage. Its decision to pare its stake to less than 10% in Bharti Airtel, is in line with its strategy of exiting markets where it did not command a leadership position.
Vodafone has got access in the fastest growing mobile market as penetration is likely to reach 500 million subscribers by 2012. Looking ahead, in mature markets such as the metros, Vodafone can launch its popular Live! services, which give value added access to entertainment, sports and pictures, and in other markets, efficiencies in network build-outs, low-cost handsets and bundled packages will play a key role in new subscriber additions. Once the 3G guidelines are announced, Vodafone’s 3G experience in Europe will come in handy for growth initiatives and give it a competitive advantage.
India’s mobile phone services market is quite different as the voice usage levels aren’t likely to increase dramatically, and the revenue would come from data and multimedia applications. Considering the rise in market opportunity, the competition will now focus more economies of scale and innovative value-added services. Globally also, Vodafone is likely to face margin pressures owing to the fierce competition in its European markets.