Vodafone India

Vodafone India

Type	Private
Industry	Telecommunications
Predecessor(s)	Hutchison Essar
Founded	1994
Headquarters	Mumbai, Maharashtra, India
Products	Mobile telephony Wireless broadband services
Owner(s)	Takshi Group Vodafone Group
Parent	Vodafone International Holdings BV (VIH)
Website	www.vodafone.in www.vodafone.com

Vodafone India , formerly Vodafone Essar and Hutchison Essar, is the third largest mobile network operator in India after Airtel and Reliance Communications by subscriber base. It is based in Mumbai, Maharashtra. It has approximately 147.48 million customers as of December 2012.

On July 2011, Vodafone Group agreed terms for the buy-out of its partner Essar from its Indian mobile phone business. The UK firm paid $5.46 billion to its Indian counterpart to take Essar out of its 33% stake in the Indian subsidiary. It will leave Vodafone owning 74% of the Indian business, while the other 26% will be owned by Indian investors, in compliance with Indian law. On 11 February, 2007, Vodafone agreed to acquire the controlling interest of 67% held by Li Ka Shing Holdings in Hutch-Essar for US$11.1 billion, pipping Reliance Communications, Hinduja Group, and Essar Group, which is the owner of the remaining 33%. The whole company was valued at USD 18.8 billion. The transaction closed on 8 May, 2007. It offers both prepaid and postpaid GSM cellular phone coverage throughout India with good presence in the metros.

Vodafone India provides 2.75G services based on 900 MHz and 1800 MHz digital GSM technology. Vodafone India launched 3G services in the country in the January-March quarter of 2011 and plans to spend up to $500 million within two years on its 3G networks.

History

Hutchison Essar (1992-2007)

In 1992, Hutchison Whampoa and its Indian business partner – Max Group, established a company that in 1994 was awarded a licence to provide mobile telecommunications services in Mumbai and launched commercial services as Hutchison Max in November 1995. In Delhi, Uttar Pradesh (East), Rajasthan and Haryana, Essar Group was the major partner. But later Hutch took the majority stake.

By the time of Hutchison Telecom's Initial Public Offering in 2004, Hutchison Whampoa had acquired interests in six mobile telecommunications operators providing service in 13 of India's 23 licence areas and following the completion of the acquisition of BPL Mobile that number increased to 16. In 2006, it announced the acquisition of a company (Essar Spacetel — A subsidiary of Essar Group) that held licence applications for the seven remaining licence areas.

Initially, the company grew its business in the largest wireless markets in India — in cities like Mumbai, Delhi and Kolkata. In these densely populated urban areas it was able to establish a robust network, well-known brand and large distribution network – all vital to long-term success in India. Then it also targeted business users and high-end post-paid customers which helped Hutchison Essar to consistently generate a higher Average Revenue Per User (ARPU) than its competitors. By adopting this focused growth plan, it was able to establish leading positions in India's largest markets providing the resources to expand its footprint nationwide.

In February 2007, Hutchison Telecom announced that it had entered into a binding agreement with a subsidiary of Vodafone Group Plc to sell its 67% direct and indirect equity and loan interests in Hutchison Essar Limited for a total cash consideration (before costs, expenses and interests) of approximately $11.1 billion.

Hutch was often praised for its award winning advertisements which all follow a clean, minimalist look. A recurrent theme is that its message "Hi" stands out visibly though it uses only white letters on red background. Another successful ad campaign in 2003 featured a pug named Cheeka following a boy around in unlikely places, with the tagline, "Wherever you go, our network follows." The simple yet powerful advertisement campaigns won it many admirers. Ads featuring the pug were continued by Vodafone even after rebranding. The brand subsequently introduced ZooZoos which gained even higher popularity than was created by the Pug. Vodafone's creative agency is O&M while Harit Nagpal was the Marketing Director during the various phases of its brand evolution.

Vodafone acquires Essar's Stake

On March 31, 2011, Vodafone Group Plc announced that it would buy an additional 33% stake in its Indian joint venture for $5 billion after partner Essar Group exercised an option to sell the holding in the mobile-phone operator. The deal raised Vodafone’s stake to 75%. Essar left the company after it implemented a put option over 22% of the venture. Vodafone exercised its call option to buy an 11% stake.

In 2007, Vodafone granted options to Essar that would enable the conglomerate to sell its entire stake for $5bn, or to dispose of part of the 33 per cent shareholding at an independently appraised fair market value. In January 2011, Vodafone objected to Essar’s plans to place part of its 33% stake in India Securities, a small public company. Vodafone feared the move would give an inflated market value to Vodafone Essar. It had approached the market regulator SEBI and also filed a petition in the Madras High Court.

The final shareholding pattern post this deal was not provided by the company as it was not clear whether Vodafone's stake would exceed the 74 per cent FDI limit. Indian laws don't allow foreign companies to own more than 74% in a local mobile-phone operator. Vodafone has assured it will comply with local rules. Vodafone will have to sell that 1% to some Indian entity, or they’ll have to consider an initial public offering. Vodafone also said that final settlement is anticipated to be completed by November 2011. The completion of the deal would be subject to meeting certain conditions which include Reserve Bank of India's permission as well as valuation of the deal.

Vodafone-Hutchison Tax Case

A billboard of Vodafone showing collaboration with Shaadi.com

Vodafone was embroiled in a $2.5 billion tax dispute with the Indian Income Tax Department over its purchase of Hutchison Essar Telecom services in April 2007. It was being alleged by the Indian Tax authorities that the transaction involved purchase of assets of an Indian Company, and therefore the transaction, or part thereof was liable to be taxed in India.

Vodafone Group Plc. entered India in 2007 through a subsidiary based in the Netherlands, which acquired Hutchison Telecommunications International Ltd’s (HTIL) stake in Hutchison Essar Ltd (HEL)—the joint venture that held and operated telecom licences in India. This Cayman Islands transaction, along with several related agreements, gave Vodafone control over 67% of HEL and extinguished Hong Kong-based Hutchison’s rights of control in India, a deal that cost the world’s largest telco $11.2 billion at the time.

The crux of the dispute had been whether or not the Indian Income Tax Department has jurisdiction over the transaction. Vodafone had maintained from the outset that it is not liable to pay tax in India; and even if tax were somehow payable, then it should be Hutchison to bear the tax liability.

In January 2012, the Indian Supreme Court passed the judgement in favour of Vodafone, saying that the Indian Income tax department had "no jurisdiction" to levy tax on overseas transaction between companies incorporated outside India. However, Indian government thinks otherwise. It believes that if an Indian company, Hutchison India Ltd., conducts a financial transaction, government should get its tax out of it. Therefore, in 2012, India changed its Income Tax Act retrospectively and made sure that any company, in similar circumstances, is not able to avoid tax by operating out of tax-havens like Cayman Islands or Lichtenstein. In May 2012, Indian authorities confirmed that they were going to charge Vodafone about 20000 crore (US $4.5 billion) in tax and fines. The second phase of the dispute is about to start.

3G

On 19 May 2010, the 3G spectrum auction in India ended. Vodafone paid 11617.86 million (the second highest amount in the auctions) for spectrum in 10 circles. The circles it will provide 3G in are Delhi, Kanpur, Gujarat, Haryana, Kolkata, Maharashtra & Goa, Mumbai, Tamil Nadu, Uttar Pradesh (East) and West Bengal. Vodafone also operates 3G services in Kerala, Andhra Pradesh and Uttar Pradesh (West) through an agreement with Idea and in Karnataka through an agreement with Airtel.. This gives Vodafone a 3G presence in 13 out of 22 circles in India.

On 16 March, 2011, Vodafone launched 3G services in Uttar Pradesh (East) in the city of Lucknow. Vodafone had already launched limited 3G services in Chennai and Delhi earlier, but the Uttar Pradesh (East) launch counts as its first fully commercial launch. This makes Vodafone the fifth private operator (seventh overall) to launch its 3G services in the country following Tata Docomo, Reliance Communications, Airtel and Aircel.

On 23rd June, 2011 Vodafone launched 3G service in Kerala by joining with Idea in an Intra Circle Roaming agreement. Initially Vodafone 3G services will be available in the following cities in Kerala – Ernakulam, Aluva, Calicut, Koyilandy, Alappuzha, Cherthala, Malappuram and Manjeri. On 28 June 2012, Vodafone launched a new international roaming package under which the users shall have not to pay multiple rentals in the countries they are visiting.

Angel Stores

Vodafone Angel Store, is a first of its kind retail concept store, that is completely managed and run by women employees, including security, pantry staff, customer service resources and management level personnel. As of 8 March 2013, there are 16 Vodafone Angel Stores across 14 states of India. Stores are currently operating in Mumbai, Delhi, Pune, Goa, Ahmedabad, Vadodara, Shillong, Bhubaneshwar, Jaipur, Agra, Mysore, Chennai, Lucknow, Kolkata, Hyderabad and Kerala.

According to Marten Pieters, Managing Director and CEO, Vodafone India, "The Angel Stores are a part of Vodafone’s commitment to provide our women employees with one of the most secure and productive work environment. Additionally, our women customers feel more welcomed while visiting the store." Vodafone's own research and customer feedback revealed that the Angel Stores help improve the quality of customer service as women generally show greater patience and empathy than men, and are able to act and help in speedy resolution. Vodafone also found that higher productivity and performance parameters recorded in Angel Stores, across locations.

Subscriber Base

Following is the Vodafone India subscriber base statistics as on January, 2013.

Subscriber Base Statistics as on January, 2013

Telecom Cicle	No. of Subscribers
Gujarat	15,801,116
Uttar Pradesh(East)	14,526,236
Maharashtra	12,977,123
West Bengal	11,165,667
Tamil Nadu	9,777,927
Rajasthan	8,565,366
Uttar Pradesh(West)	8,999,073
Andhra Pradesh	6,080,916
Delhi	8,449,120
Goa	7,134,576
Karnataka	6,452,620
Kerala	6,067,506
Bihar	6,381,278
Kolkata	4,084,284
Punjab	4,309,853
Haryana	4,437,015
Madhya Pradesh & Chhattisgarh	4,101,877
Chennai	2,091,411
Odisha	2,789,575
Assam	2,188,073
North East	928,563
Jammu & Kashmir	666,009
Himachal Pradesh	475,329
Mumbai	6,160,353

Total number of Vodafone India Subscribers : 141,519,840, i.e. 22.44% of the total 657,158,013 Indian mobile phone subscribers.

Awards and recognition

The Brand Trust Report, 2011 published by Trust Research Advisory has ranked Vodafone as the 16th most trusted brand in India.

Controversies

Vodafone tax controversy involved in a Rs 11,000-crore tax dispute case with Indian government.

Timeline

1992: Hutchison Whampoa and MAX group establish Hutchison Max

2000: Acquisition of Delhi operations and entry into Calcutta (now Kolkata) and Gujarat markets through Essar acquisition

2001: Won auction for licences to operate GSM services in Karnataka, Andhra Pradesh and Chennai

A 'You and I' print advertisement of Hutch featuring Cheeka (dog)

2003: Acquired AirCel Digilink (ADIL — ESSAR Subsidiary) which operated in Rajastan, Uttar Pradesh East and Haryana telecom circles and rebranded it 'Hutch'.

2004: Launched in three additional telecom circles of India namely Punjab, Uttar Pradesh (West) and West Bengal.

2005: Acquired BPL Mobile operations in 3 circles. This left BPL with operations only in Mumbai, where it still operates under the brand 'Loop Mobile'.

2007: Vodafone acquires a 67% stake in Hutchison Essar for $10.7 billion. The company is renamed Vodafone Essar. 'Hutch' is rebranded to 'Vodafone'.

2008: Vodafone acquires the licences in remaining 7 circles and has starts its pending operations in Madhya Pradesh circle, as well as in Orissa, Assam, North East and Bihar.

2011: Vodafone Group buys out its partner Essar from its Indian mobile phone business. It paid $5.46 billion to take Essar out of its 33% stake in the Indian subsidiary. It left Vodafone owning 74% of the Indian business.

See also

• Vodafone
• Hutchison Essar

External links

• Vodafone India Official website
• Vodafone Group Official website