Vodafone India, a subsidiary of Vodafone Group plc (VOD), has offered to pay INR 40 billion (approximately $680 million) to the India government to continue operations in the country’s key metros. The company’s operating license will expire in Nov 2014. Since India is one of the key emerging markets for the company, obtaining the license for operations will be crucial for securing its future business in the subcontinent.
In April, the company challenged the country’s regulatory decision of rejecting license extension in three major operating circles namely, Delhi, Mumbai and Kolkata. The Department of Telecommunication in India rejected the company’s application stating policy changes since 2012. Indian regulators had asked the company to bid for airwaves in areas in which it has completed 20 years of operations including key metropolises. However, the company said in its defense that the rules for the new telecom license have not yet been declared. Accordingly, current applications for renewal should not be subjected to rejection based on these grounds.
Vodafone continues to focus on the Indian market despite regulatory disputes that impede its growth in that country. Given the growth opportunities in India, the company is accelerating its investments there to build infrastructure. In recently published reports, the company stated that it invested approximately INR 10 billion in 2012 in Delhi, Mumbai and Kolkata.
If the disputes continue, debarring Vodafone from continuing operations in lucrative zones, it would distress the company’s financials, as it has already infused huge capital in these cities. Further, Vodafone’s entering into a new license auction remains uncertain as it has already moved a petition against spectrum auction held in India in Mar 2013. The company condemned the decision of the Department of Telecommunication in India to put up an auction for the 900 Mhz spectrum by taking away existing licenses for the same from operators.
Based in Newbury, United Kingdom, Vodafone Group is the world’s largest revenue generating wireless communications operator and the second largest carrier after China Mobile Limited (CHL) based on subscription. In the European market, the company operates with the likes of Telecom Italia S.P.A (TI) and Telefonica SA (TEF).
Vodafone has a Zacks Rank #3 (Hold).
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