14th Feb 2014 15:00
LONDON (Alliance News) - Vodafone Group PLC Friday said it had acquired mobile spectrum licenses in India for GBP1.9 billion, enabling it to roll out 4G services and bolster its 3G services in key cities like Mumbai and Delhi.
The company said its Indian unit was awarded spectrum licences in 11 telecom circles in the Indian government's 900 MHz and 1800 MHZ spectrum auction. It said it bought a total of 23MHz in the 900MHz band in Mumbai, Delhi and Kolkata and 49MHZ in the 1800MHz band in Mumbai, Delhi, Kolkata, Karnataka, Kerala, Gujarat, UP East, Rajasthan, Haryana, Andhra Pradesh and Punjab.
It will pay GBP540 million in the current financial year and the remainder in instalments, with payments commencing in 2017.
"Vodafone India has established a strong platform for 4G data services by buying 1800MHz spectrum in Mumbai, Delhi, Kolkata, Karnataka and Kerala, which account for more than 50% of data revenues and are expected to drive the adoption of 4G as was the case after the introduction of 3G services in 2010," the company said in a statement.
"Vodafone India also maintained its overall holdings of 900 MHz spectrum in Delhi, Mumbai and Kolkata, and purchased 1800 MHz spectrum in four circles where its licences are due for extension in 2015," it added.
Vodafone had pledged to spend a chunk of the USD130 billion it got for selling its stake in Verizon Wireless late last year on bolstering its 3G and 4G networks in key regions. In Africa, the Middle East and Asia-Pacific region, Vodafone has said it will invest GBP1.5 billion to extend 3G coverage across major cities and key regions and establish a fibre optic network.
Vodafone India has over 160 million customers, with the number of mobile internet users increasing 38% to 45.7 million in its most recent quarter. Data usage is also growing strongly.
The auction lasted for 11 days, and saw 68 rounds of bidding, with Vodafone facing fierce competition for the spectrum licenses; among the other bidders were Bharti Airtel Ltd, Idea Cellular Ltd, Aircel Ltd, Tata Teleservices Ltd and Reliance Communication Ltd. "At first glance, GBP1.9 billion looks like a lot of money," Berenberg analyst Paul Marsch told Alliance News.
"For Vodafone the spectrum buy is about shoring up spectrum holdings and building a platform for 4G. It is still appealing the decision to force it rebid for 900MHz spectrum rather than having its licences renewed, but has hedged its bets by acquiring this spectrum in Mumbai, Delhi and Kolkata," said Senior Telecoms Analyst at IHS, Julian Watson.
"Vodafone lacks the 2.3GHz spectrum won by the likes of Reliance Jio, Bharti Airtel and Aircel. But its purchase of 1800MHz spectrum in Mumbai, Delhi, Kolkata, Karnataka, Kerala, Gujarat, UP East, Rajasthan, Haryana, Andhra Pradesh and Punjab will enable it to launch 4G LTE in a band (1800MHz) that supports a far richer range of devices than 2.3GHz," Watson said.
Watson added, "more broadly this is about Vodafone increasing its exposure to India: despite considerable regulatory and tax risks it is also seeking full ownership of Vodafone India."
Vodafone spent GBP790 million on UK spectrum licenses in February 2013, buying up 20MHz in the 800MHz band, 40MHZ in the 2.6GHz band and an additional 25MHz of unpaired spectrum in the 2.6GHz band for an initial term of 20 years.
However, UK Telecoms operator Ofcom is proposing a big rise in spectrum charges that could see Vodafone paying up to five times as much a year for its spectrum usage. Under Ofcom's new proposals, Vodafone would have to pay GBP83.1 million a year for using the spectrum bands, a five-fold increase from the current level of GBP15.6 million.
The UK government directed Ofcom to revise spectrum fees so that they fully reflect market value in December 2010. "Spectrum in a valuable and finite national resource," Ofcom said in a statement last October when it proposed the new fees. "Charging for it can incentivise the optimal use of frequencies."
Under Ofcom's proposed prices, Vodafone's 20 year licence would be closer to a sum of around GBP1.67 billion.
Shares in Vodafone were trading down 1.6% at 217.90 pence Friday afternoon.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
Additional reporting by Hana Stewart-Smith; hanassmith@alliancenews.com; @HanaSSAllNews
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