UK's Vodafone Group may spend over a $1 billion in India this fiscal despite its earlier investments not yielding expected returns, according to Mr Vittorio Colao, Global CEO, Vodafone Group.

“Has India been a good case in terms of ‘return on investment'? Unfortunately, the answer is no…Having said that I am happy with the commercial success and the way our operations in India have been run…,” Mr Colao, who is on a visit to India, said here on Tuesday.

Vodafone had entered the Indian market by acquiring a controlling stake in the erstwhile Hutchison Essar in 2007 for $11 billion. Since then the company has invested over $7 billion, including the $2.4 billion (Rs 11,618 crore) spent on acquiring 3G licences.

One of the reasons for the less-than-expected returns were ‘changes which took place in the sector one year after the acquisition', said Mr Colao.

Mr Colao was referring to the 122 new 2G licences issued in January 2008 by the Department of Telecommunications, which in addition to becoming the subject of huge debate recently, had made the market more competitive for incumbent telecom operators

“We need now to make sure that the first question (return on investment) gets a ‘yes'. This is because you need to have good returns to continue long-term investments in any geography,” said Mr Colao.

Vodafone's ride in India had become bumpier thanks to the $2.5-billion tax bill that was slapped on it by the income-tax authorities. At the heart of the matter is the non-payment of capital gains tax on its 2007 deal acquiring the controlling stake in the then Hutchison-Essar. Vodafone's stance is that the seller in the transaction (Hutchison Whompoa) should be taxed and not the buyer (Vodafone).

“By going after the buyer, just because the buyer is around and the seller is not, sounds a bit like slapping the wrong child for something that has happened in the family,” said Mr Colao. The Supreme Court is expected to pronounce its verdict on the case in July.

In fiscal 2012, the company's investments would focus on strengthening infrastructure related to its newly launched 3G services, in addition to increased spend in its broadband and enterprise services businesses.

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