Vodafone shares fall on acquisition costs of Indian 3G and broadband

Vodafone (LON:VOD) shares have dropped after midday as investors fear the group will have to pay over the odds for broadband access in India after it pumped £1.74bn into securing nine circles of 3G spectrum in the country earlier this week as the rights were auctioned off.

Kate Neilson
shareprices.com - Friday, May 21, 2010

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Vodafone paid £1.74bn for nine circules of the Inidan 3G spectrum

Vodafone’s fortunes began brightly at the start of the week with the group releasing end-of-year results headlined by a double in profits to £8.7bn compared to the £4.2bn the year previous.

Vodafone accounted the profit gain to a massive demand for smartphones – bolstered by the mobile telecommunications group securing contracts to sell the hugely popular iPhone 3G and 3GS on its network in January.

Chief Executive Vittorio Colao said Vodafone would return to underlying revenue growth this year for the first time in three years after achieving its £1bn cost-cutting target a year ahead of schedule and has planned another cost-slashing strategy to save the same amount over the next 18 months.

The report came a day after the group’s majority-owned South African business, Vodacom, announced increased earnings for the year sending expectations and the shares in Vodafone up.

And it continued to perform strongly on the day of the double in profits announcement.

But the share price has taken a number of hits since following the pricey acquisition of nine circles in the India 3G spectrum.

Vodafone did secure strong zones including Delhi, Mumbai and Kolkata, but at the cost of £1.74bn as the Indian 3G auction hit unprecedented prices.

Reports that Vodafone is looking to sell-off its controlling stake in Vodafone Egypt Telecommunications for £3bn to cover the costs did inspire some confidence in investors.

But with the auction of airwaves for broadband wireless activity in India confirmed to be starting on Monday according to the Department of Communications in the country, investors fear another competitive environment and are worried Vodafone will have to bid higher than any anyalsts had predicted to secure licences.

Just after midday BST, Vodafone’s share price has dropped 2.25p or 1.74 per cent to 127.20p.

The shares had been up 2.28 per cent at one point this morning and was out-performing a declining FTSE 100.

 

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