Vodafone hits out at India
Vodafone Group Plc signalled increasing frustration with its key Indian unit on Tuesday, taking a charge of £2.3 billion ($3.3 billion) due to fierce competition and rapidly escalating spectrum costs.
The world’s second-largest mobile operator by revenue entered the Indian market in 2007 after beating rivals in a high-profile auction to make it the key territory in its growing emerging markets portfolio.
But the country has since handed out licences to many more operators, resulting in a fierce price war. A spectrum auction has gone far higher than any analyst had expected and major consolidation moves among operators are still not allowed.
The impairment charge on the value of the India assets, along with comments by chief executive, Mr Vittorio Colao, that India’s telecoms rules did not make sense, cast a shadow on otherwise solid full-year results.
“We have seen very strong price declines,” Mr Colao told reporters. “I don’t think these rules (on consolidation and spectrum) make sense. India needs investment. India is a vast country with a vast population still not fully able to communicate. “What India needs is investment and good technology and this will not come in an environment with too many operators and fragmentation of investment.”
SingTel, southeast Asia’s biggest telco, has also war-ned of slower than expected gains in India through its associate Bharti Airtel.
Vodafone is engaged in a spectrum auction in India which has exceeded most expectations. Bids for one set of nationwide third-generation (3G) mobile spectrum licences reached $3.54 billion on Monday, the 32nd day of the auction.
But on top of the auction, the Indian telecom regulator has called for mobile operators to pay a one-time fee for the 2G radio spectrum with high bandwidth which they won several years ago, a move that has drawn fierce criticism from all involved.
Vodafone said the impairment did not include any costs for a possible 2G bill and said the company expected to negotiate with the regulator. Analysts said the impairment indicated Vodafone had overpaid and said problems in the market, where it has over 100 million customers, overshadowed gains elsewhere.
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