Vodafone looks to list Indian arm

Vodafone Group Plc Chief Executive Vittorio Colao today said the company could list its Indian arm and was open to acquisitions when opportunities are available in the country.

The head of the world's largest mobile company in terms of revenues suggested changes in the regulatory regime for mergers and acquisitions.

When asked whether Vodafone would list its Indian entity, Colao, who is in Delhi to attend the marriage of Indian partner Analjit Singh's son, told Business Standard: "It is a possibility...There are different ways of getting exposed to local ownership. One is by having a local partner, another by listing."

When asked if there was any acquisition plan in India in the future, Colao said, "We are open to acquisition as India is an important market."

The UK company, which runs the country's second largest mobile company by revenues has a joint venture with the Essar group -- Vodafone-Essar.

Two years ago Vodafone and its associates bought over the 67 percent equity stake of Hutchison in the company.

Asked about tariff wars and new players making competition tougher, Colao said, "Except Bharti Airtel, no operator in the country has positive cash flow. We made £300 million (Rs 2,283 crore) as margin in India. Our investment was £500 million (Rs 3805 crore) in the first six months of this year, so we have negative cash flow of £200 million (Rs 1,522 crore). This cannot go on."

He further said, "For the whole year we would invest £1 billion (Rs 7,610 crore) and may have EBIDTA of £600 million, but still remain in the negative. That is why customer service is not of high quality, which has to be addressed by policy makers. Also, globally, telecom is seeing consolidation."

He added that if certain policy decisions were not taken, India's penetration of broadband wireless, too, would remain at one per cent.

The company has invested £3 billion (Rs 2,2831 crore) since Vodafone took over, which includes £1 billion (Rs 7,610 crore) this financial year. Colao said there were too many players and merger and acquisition rules should allow easier aggregation, which could be in different ways like aggregation of networks, companies and operations.

India has over seven-eight players in each circle (which will increase to about 10-12), higher than global norm of not more than three players.

Colao said the company was open to exploring other areas of the telecommunications pie (beyond mobile) like IPTV, when the time was ripe for investments.

He added that the aim was to the reduce the gap between Vodafone and Bharti Airtel in terms of overall mobile revenue share. Vodafone-Essar has a revenue share of 22 percent, while Bharti is at 34 percent.

When asked how long it would take to bridge the gap, Colao said, "It can take 25 years, and generally my prediction is right as it takes a long time to bridge such a gap."

Asked about the $2 billion show cause (Rs 9,000 crore) notice issued by the Income-tax department to Vodafone-Essar, Colao said, "We will reply to the notice by the end of January. The main point is we are the buyer and capital gains tax is paid by the seller. Also, in no other such foreign transactions has a company been asked to pay the tax. There is no liability on us."

The Income-tax department had issued a notice saying why it did not deduct $2 billion while paying Hutchison the value for buying them out, which was $11.2 billion.

The Indian operation in the first six months of this financial year contributed £1485 million (Rs 11,312 crore) revenue with EBIDTA of £357 million (Rs 2,719 crore).

Last year in the same period it had revenues of £1178 million (Rs 8,972 crore) with EBIDTA of £335 million (Rs 2,552 crore).