The world’s largest mobile operator, Vodafone Group, has continued its expansion into developing markets, buying a stake of just over 10% in Bharti Tele-Ventures, India’s mobile market leader, for $1.49 billion. This should help Vodafone grow its subscriber base in the rapidly-growing Indian market at a time when its core markets are highly saturated.
Vodafone has bought a stake in Bharti Tele-Ventures.
Bharti has a reputation as one of the most innovative telecoms operators in the world, aggressively using outsourcing to quickly modernize its IT infrastructures and back-office processes in order to keep pace with the country’s rapid economic growth.
India is one of the world’s fastest growing mobile markets, with its huge population and expanding economy. The advent of low-cost mobile phones has also prompted a huge increase in demand.
Other local players in the market include Bharat Sanchar Nigam, India’s second-ranked GSM operator, and Reliance Infocomm, which uses rival CDMA technology. Bharti also competes with Hutchison Essar Telecom, owned by Hutchison Telecommunications International.
In the past, Vodafone has made clear that it plans to expand into under-developed markets to counter the high mobile phone saturation rates in most of its core markets. Therefore the deal is not surprising, especially given Vodafone’s failure to establish a wholly-owned unit in the US.
The US setback came when it lost the bidding war in February 2004 for AT&T Wireless Service to Cingular Wireless, which paid $41 billion plus debt for AT&T Wireless to make it the US’s largest mobile operator.
However, this setback left the Newbury, UK-based company with something of a strategic problem. Vodafone owns mobile networks in 27 countries, and has partners in another 14, but most of these are fairly well-saturated, giving it little scope to significantly grow its total worldwide customer base.
In recent months, Vodafone has turned its attention to emerging markets, as witnessed by its March acquisitions, namely Romanian mobile phone group Mobifon, and rapidly growing Czech wireless operator Oskar Mobil.
Yet Vodafone is no stranger to the fast-growing Indian market. In June 2003, the company sold its 20.76% stake in RPG Cellular to Indian mobile phone group Aircel, because that stake did not give Vodafone a strong enough position in the country. Vodafone’s traditional expansion strategy is to acquire a minority stake in a leading mobile operator, and then gradually increase its holding until it can acquire the entire stock.