Eloquent, concise and forceful, Vodafone CEO Arun Sarin stood his ground while talking to the media on his first visit to the country following the company’s acquisition of the controlling stake in HEL. A little overwhelmed at the attention he was getting, the India-born Sarin was heard saying, “It is definitely out of the ordinary. I wish it was slightly less. I have many relatives here and they have been complaining that I am taking up too much space on the airwaves.”
But they were the only ones complaining. The media clearly could not have enough of him. They directed a volley of questions at him ?? relating to the Hutch acquisition, future plans, partnership and the Indian telecom sector ?? and he dealt deftly with them. Here are his views on various issues…
The Vodafone-HTIL deal
The agreement with Hutchison Telecom International Limited (HTIL) involves Vodafone paying $11.08 billion for a 67 per cent economic stake (52 per cent equity stake and 15 per cent combined stake held by Asim Ghosh, Analjit Singh and IDFC) in HEL, giving it management control of the company.
Partnership with Essar
“Vodafone’s first, second and third preference for a partner is Essar,” said Sarin rhetorically, adding that he would even woo the Ruias with flowers. “It happens to be Valentine’s Day!” he said in explanation. At the same time, he made it clear that Vodafone meant business. He strongly refuted Essar’s right of first refusal to buy HTIL’s stake in HEL with respect to Vodafone. He did not, however, comment on Essar’s right of first refusal with respect to other parties. If Essar declines the offer, it could exit the venture at the same price as is being paid to Hutchison (which is a majority control price), noted Sarin. Vodafone is looking to close the transaction in April 2007, so Essar has four to five weeks to decide.
Plan B
Vodafone has Plan B in its bag, in case Essar chooses to exit HEL completely. Local minority partners like Asim Ghosh, Analjit Singh and IDFC could increase their stake to 26 per cent, thus taking care of the mandatory Indian equity component. Alternatively, Vodafone could subscribe to Essar’s 22 per cent shareholding held overseas, in an offshore India transaction. Either way, Vodafone clearly intends to stay on in the country for a long time.
Vodafone-Bharti MoU
Brushing away Essar’s rumoured upset over Vodafone signing an MoU with Bharti on infrastructure sharing without consulting it, Sarin remarked: “The network and infrastructure agreement with Bharti is just an expression of intent. It will be fully vetted by all shareholders.” The agreement covers infrastructure sharing and is designed to lower costs for the business. HEL can benefit substantially, not only from spectrum sharing but also in areas such as intra-circle roaming. The agreement with Bharti is good for both HEL and the country. Importantly, the venture is something Vodafone is planning only for the future.
Indian telecom market
Vodafone is very bullish on the Indian telecom industry as it is one of the fastest growing mobile markets in the world. It is likely to see reverse synergies taking place in the near future. In the medium term, there will be some level of consolidation in India. However, with spectrum being limited, it will not be easy for a new player to come in. In the near-medium term, it is unlikely that many international brands will come into India, but anything is possible in the longer term.
Regulation
“We are just stepping into the shoes of HTIL and are fully compliant,” stated Sarin. “The regulatory picture in India is encouraging. The openness of the authorities towards greater active network sharing should bring affordable communication to a much larger population.”
Plans for the Indian market
Vodafone has committed to investing $2 billion in the Indian market in the near future. This will be used to roll out HEL’s network in India’s hinterlands and provide cheaper rates and better services to customers.
For users
With Vodafone’s entry, customers can look forward to cheaper call rates and handsets, and value-added services such as banking and money transfers. However, the company is yet to decide whether it will roll out 3G in India or not. For the time being, it does not think that 3G will have a big impact in India.
Vodafone’s targets
Vodafone is targeting to occupy the top slot by 2010 with 100 million customers. “We will not only offer more services to existing consumers, but also increase HEL’s market share considerably,” said Sarin.
Change in brand name
Though Hutch is a premium brand built over a period of time, it will eventually be replaced by Vodafone. The company will retain the Hutch brand for some time and consult its customers before going in for a complete makeover. As an immediate next step, Vodafone is looking at co-branding. Thereafter, it will replace it with the Vodafone global brand in a phased manner. The change in brand name will, however, have to be effected as the users would benefit if all the company’s services globally are brought under a single brand. The change will be completed by 2010.
Senior management
Vodafone has endorsed Asim Ghosh’s continuation as CEO. However, no firm decision has been taken on the board’s composition.
IPO plans
An IPO can be ruled out for the time being. Vodafone has the resources to expand and will bring the wealth of its global expertise here.
“Pug” mascot to stay
Hutchison Essar’s talismanic pug, Cheeka, will stay because of its strong brand association.
