India remains Vodafones best bet

Written by Rachana Khanzode | Mumbai | Updated: May 22 2009, 06:26am hrs
Just two years back, when the pug moved out from its pink house (Hutchison Essar) to the red (no pun intended), claiming change is good, no one expected Vodafone to make this big a statement in the second largest wireless market in the world after China. There was a bit of skepticism and sense of uncertainty as to how the brand, which had been rechristened several times before that, would address the most challenging market in the world.

As things stand, with 71.5 million subscribers (customer penetration at 34%) today, Vodafone is the second largest mobile service provider by revenue in India. India has also emerged as the highest incremental growth geography for Vodafone, the worlds largest cellphone operator by revenues.

We have continued to drive penetration in India, generating strong revenue growth from our brand and commercial offers and a substantial investment in network coverage, said Vittorio Colao, chief executive, Vodafone Group, at the announcement of the last quarter results.

Of course one needs to see Vodafones growth story against the backdrop of the fantastic growth in the mobile user base in India, which, analysts say, will continue till 2011-12. In the last fiscal, the cellular subscriber base grew 66% to touch 261 million, up from 157 million in 2006-07. The telecom services revenue rose 21% to stand at a whopping Rs 1,30,561 crore.

In fact, Vodafone started off in India in 2007 with a big initial advantage. With 260 million subscribers globally, this UK-based company enjoyed economies of scale that none of its Indian competitors did. The global scale helped the company source telecom infrastructure at highly competitive rates.

Of course, its India revenues are smaller than other markets. During the 2009 financial year, it added 24.6 million customers in India and reported revenues of 2,689 million from 1,822 million in the last financial year. In Europe, organic service revenues declined 1.7%, while in Africa and Central Europe, it grew 3.9%. In Asia Pacific and the Middle East, revenues increased 19% on a pro-forma basis, reflecting a strong contribution from India, where revenues grew by 32.9% on a pro-forma basis.

While at the one end, the Group is talking about accelerating its 1 billion cost reduction programme, on the other, it has invested 5.9 billion in capital expenditure, including 1.4 billion in India, to drive growth. During the year, the firm reached out to its subscribers in seven more circles.

India showed a robust growth driven by continued but lower GDP growth and increasing penetration. Its data revenues too were a contributor growing more than double from 97 million in the last financial year to 148 million this year.During the fourth quarter, it derived benefit of the new revenue stream from the network sharing joint venture, Indus Towers, which was launched in the first half of the year and was able to offset the slow underlying growth rate.

Going ahead, India is expected to be a high investment area for Vodafone, indicated by its outlook for the financial year 2010. In this period, it expects the depreciation and amortisation to be around 8.5 billion, reflecting India, Vodacom (the South African firm which it acquired last year) and foreign exchange.