On his recent visit to India, tele.net spoke to Arun Sarin, chief executive officer of Vodafone, during a media interaction session. With the differences with Essar now firmly behind them, Sarin spoke at length about the new dynamics in the company, its expansion plans, and longer-term goals. Excerpts…
What do you see as the key opportunities for Vodafone in the Indian telecom market and what are the challenges the company might face?
The Indian telecom market offers considerable opportunities, starting with the potential of the untapped rural market right through to the introduction of value-added services. The future challenges we may face in the Indian market are likely to be similar to those Vodafone has dealt with in other markets. Vodafone sees India as a market full of potential rather than one with various challenges. The country still awaits the benefits of advanced 3G spectrum and the latest 4G spectrum. So, there is a lot to experience for the Indian audience.
What are the company’s immediate plans for the Indian market?
The transaction is still subject to regulatory approval, and so our comments should be viewed in light of this. We intend to accelerate capital expenditure in the networks to drive penetration in the rural areas and new regions. We will also continue to improve the sweep of products and services to our business consumers and end-users. We intend to continually innovate for new technologies that will enable delivery of new voice and data products.
What percentage of Vodafone’s profits comes from emerging markets and what is the quantum of investment that has been set aside for India?
Emerging markets are going to play a key role in our overall global strategy. Currently, around 10 to 15 per cent of our profits come from these regions. We are looking at doubling this profit over the next three years. Our current acquisition has made a huge dent in our topline. Nevertheless, over the next couple of years, we are ready to invest several billions of dollars in India.
Is an IPO on the cards in the near future?
We are not likely to go in for an IPO in the next couple years as we have enough capital available within Essar and Vodafone for our immediate future plans. We intend to concentrate on achieving the next level of growth for the company.
With the government allocating spectrum for 3G services, will Vodafone Essar be launching 3G in India?
We have 3G expertise and we will be bringing it to India. However, our principal focusis on 2G and ensuring we bring mobile communications to a much greater proportion of the Indian population. Vodafone has considerable expertise in 3G, as we have launched it in many of our other markets. However, in India, our primary business goals are centred on 2G. Vodafone will launch 3G services at some point in the future, but it is too early to say when.
Is the partnership between Vodafone and Essar a partnership of equals?
Both companies bring their individual strengths to the table. Whenever we enter a country, we work from the helm and let the domestic partner take centrestage. This has worked well as the domestic partner knows the market better.
What are the implications of the delay in getting approval from the Foreign Investment Promotion Board (FIPB) for the acquisition?
This is not a delay. This is in line with our understanding of the process. We said we expected to complete the transaction in the second calendar quarter and we are confident of meeting this timescale.
What measures will Vodafone take in case the approval does not come through?
We have filed all the required documents and data with the FIPB. We are very confident that an approval will come through in some weeks. In case an approval does not come through, we will come up with Plan B. Right now, we cannot hypothesise what will happen in the future.
When is the transition from Hutch to Vodafone likely to happen?
It will happen slowly and steadily. Hutch has managed to build strong brand equity for itself. We intend to retain that equity initially. However, we will eventually replace it. This will be done in phases. The company will retain the Hutch brand for some time and consult their customers before going in for a complete change. As an immediate next step, Vodafone is looking at co-branding before replacing it with the Vodafone global brand in a phased manner.
Under the new agreement with Essar, who retains the right of first refusal (RoFR) for the 15 per cent stake jointly held by Asim Ghosh, Analjit Singh and IDFC?
In the eventuality that the 15 per cent stake jointly held by Asim Ghosh, Analjit Singh and IDFC is up for sale, Vodafone will have the RoFR. In case Vodafone’s shares are up for sale, Essar will have the RoFR and likewise in the case of Essar.
Is Vodafone’s memorandum of understanding (MoU) with Bharti exclusive or will the company consider other operators as well?
The MoU with Bharti is simply an intent; there has been no signed agreement. The agreement is also not solely with Bharti and we welcome other interested operators to pitch in. The important thing is that every individual operator should not set up separate towers.
How does Vodafone intend to expand its presence in other emerging markets?
Vodafone may look to make some further selective acquisitions, which would have to meet our stated strategic and financial criteria, but we are not willing to give any specific details on future plans in this area. Meanwhile, India in itself is a rapidly growing telecom market. In fact, the fastest growing market in the world. We intend to focus all our attention in the immediate future on building our brand in this country. This will occupy our attention for the next couple of years.
What are the company’s goals in the short and long terms?
Hutch is a very well-run business and it has a very good management team. Vodafone’s plans include accelerating capital investment in the network. This will enable Hutch to expand into new regions and offer mobile services to a much greater percentage of the Indian population. Vodafone plans to introduce new products and services and it will engage closely with Hutch’s commercial team to ensure these new products and services meet the needs of the Indian customer. An example of the new products will be an exciting range of low-cost handsets which will be launched in the market before the end of 2007. We are targeting a market share of 20-25 per cent in the coming years. We also have the longer-term goal of being the leading operator in India.
What are the key concerns that need to be addressed?
There are no key concerns. We have clear plans for the business and will execute these over the short to medium term. Vodafone is targeting a market share of 20-25 per cent in India and the Hutch business is an excellent springboard, with a 25 million customer base, a national footprint, strong processes and a great management team.
Where, in your opinion, is the Indian telecom market headed?
The Indian market is the fastest growing major mobile market in the world, and with penetration at only 13 per cent, this rapid growth is likely to continue for some years to come. Vodafone is strongly committed to India and our plans for the business will help the Indian government achieve its ambitious targets for teledensity in the next few years.
How has the company’s performance been in the past one year? Has it been up to expectation?
The company has performed strongly in the last year, with particularly good operating results from Vodafone’s emerging markets’ division. In January 2007, the company reported that its (proportionate) customer base had exceeded 200 million around the world.
Where does the organisation see itself two years from now?
We have set ourselves a target and intend to be the number one player by 2010.
