Blog Post

Vodafone buys into India

For all its global assets, India was one of the countries that was conspicuously missing from Vodafone’s global footprint. World’s largest wireless operator changed all that, and bought a 10% stake in Bharti Telecom, one of the largest GSM operators in India. Vodafone paid $1.5 billion for that stake. Singapore Telecom is the other major holder in the company. The two companies now own about 45.9% of the company. Singapore Telecom, Fidelity and Capital recently bought 9.3% of the company from Warburg Pincus. (Funny, Vodafone sold their stake in RPG Cellular last year, so what made them change their mind?)

The Economic Times says Warburg Pincus, a US-based private equity company has been able to get six-times return on their investment in the company. They had acquired about 18% stake in Bharti for $300 million. They sold 5.6% of their stake to Vodafone for about $847.5 million, and cashed about 3.35% of their stake at the time of the IPO for $200 million.

The flurry of deals should not come as a surprise – Indian Government just eased limitations on the foreign direct ownership in Indian telecoms to 74% from 49%. With this deal, Bharti is now being valued at $15 billion, for a company with around 20 million subscribers.

6 Responses to “Vodafone buys into India”

  1. Dear Jacob:
    Conservatively expecting an EPS of Rs10.00 for the year ending March-06, the stock price of Rs330 is at a P/E of 33, which is fair for a company growing at the rate of 30-40%. Read BusinessWeek on how the IBM CEO showered praises for Sunil and his business model. Only thing that concerns me is Sunil diversifying into Infrastructure which will make him little lesser focused on Telecom.

    Ghosh at Hutch is another aggressive CEO. Hutch and BSNL are gaining grounds at cost of Bharti for customers who want national roaming. Hope Sunil gets this message soon.

  2. Jacob Varghese

    $15 billion US dollars for 20 million customers seems really steep considering how little revenue is coming in. What is the average monthly recurring revenue per customer? My impression was that it was quite low in terms of US dollars.

  3. What can I say about it, India is going to be huge. It will be 2nd to china in that respect. Imagine us being behind both china and india some day soon. Depressing as hell, but now we know what england has been going through this past century.

  4. It was a wrong move. I know Sunil since a long time. I should say from the days since he was an ITI supplier. It depends on what Vodafone is looking for. Are they just trying to be like Singtel or they want to takeover Bharti ? The latter will not happen as I know Sunil won’t give up control of this company which he has organically grown from a single circle(Delhi) into nations second largest telecom company.

    If I were Sarin, I would negotiate with IDEA cellular and Anil Ambani controlled Reliance Telecom and simaltenously takeover the two. IDEA would give a big foot-print in regions of North and West while Reliance Telecom would give him whole of East. Then I would look to grow. But Sarin is Vodafone CEO and I am still a programmer LOL. So guess Sarin has something planned but that may not work in India as the economy is lot different. Hopefully the western CEOs wont spoil the Indian market.