Vodafone has insisted that it remains as committed as before to the Indian market. On Monday, CEO Vittorio Colao said the “momentous” transaction creates not only a market leader in India, and important synergies, but also gives the company optionality in India and at a group level for its future strategy.
“Our job is to maximise the value of the assets we have. Our strategy remains the same: convergence and data in Europe, good growth in emerging markets, and enterprise,” he said. Colao further said that the company’s involvement in the partnership will be similar to its role in other markets such as the Netherlands, where it has partners, and rejected suggestions that it marked a change in past policy, that had been to exit deals where it did not have full control. “Our job is to maximise the value of the assets that we own...thanks to this deal we have a top position in 21 out of 22 circles…we have to be pragmatic.”
“For India ownership of 100 per cent of a smaller asset with less value and less possibility to provide is less appealing than having co-control of a much better asset. We will have the spectrum network and the distribution capability to support the growth of data and voice in the long term in much better condition than before. It equips both us and Idea to be much more competitive in the future.”
Asked whether the deal could go down the route of its partnership with Verizon Communications (Vodafone sold its 45 per cent stake in Verizon Wireless in 2014), Colao said there are differences between the two. “This is a listed company, not a privately owned one like Verizon…there are many differences: policy, dividend, leverage…it’s a completely different situation from 15 years ago.” The company also said it had negotiated clauses that protected the company from adverse changes, and that there is a three-year standstill agreement under which the companies cannot sell any shares in that period, after which there will be full flexibility.
The deal doesn’t mark a shift in priorities away from India, said Kester Mann, an analyst covering mobile network operators at CCS Insight. “The main driver is just how strong the competition has been in India…the market was in need of consolidation and this is the right response to a changing environment.
Good hedgeAfter exiting the US side, India helps give it the diversity that it needs, and is a good hedge in the face of a stagnant Europe,” he said. However, he added that there would be questions about the brand going forward. “What is the brand (of the joint venture) going to be? What will be the strategy? How will the integration of the networks play out? These are the things that will give us a better idea of its longer term strategy.”