Essar to ask Voda to pay $700 mn more for 33% stake

Vodafone's $5-billion deal to buy out Essar in India's third-largest mobile phone company may run into trouble with the local partner seeking $600-700 million more for its 33% holding. 

Essar group, known for its strong-arm negotiation tactics, will invoke a Reserve Bank of India resolution that stipulates a minimum value for Indian shares in privately-held companies, two people familiar with the development said. 

The April 2010 RBI resolution, which sought to protect domestic companies from aggressive multinational buyers, mandates that Indian shares in privately-held firms should be valued under the discounted cash flow method. Under this method, Essar's 11% stake in Vodafone Essar is worth $1.8-1.9 billion, compared with the purchase option that pegs it at $1.2 billion. 

Vodafone purchased 67% interest in the Indian telco from Hutchison Whampoa and two Indian shareholders Analjit Singh and Ashim Ghosh in 2007 in a $11-billion deal. At that time, Essar and Vodafone agreed that the former could sell its interest in the company to the latter for $5 billion till May 2011. 

The agreement was formed in two parts - one a put or sell option for 22% held by the Essar group overseas and the other a call or buy option for Vodafone to buy 11% stake the Essar group held in India. 

Essar had the first right to exercise its option, but if it tendered its entire 22%, Vodafone's option would become valid. 

The partners had agreed that should only a part of the option be exercised, the value of the stake changing hands would be ascertained by three investment banks, but the amount would be capped at $5 billion if the entire option was exercised. 

The options were to expire on May 8, after which both sides would have been forced to negotiate a price, which, industry analysts say, would have been less much than $5 billion. The country's top mobile company, BSE-listed Bharti Airtel, was valued at $33 billion when Vodafone bought a 67% stake in the then Hutchison Essar in February 2007. 
Bharti is now valued at around $30 billion, despite adding some 180 million customers since then. 

In March, Vodafone said it would purchase Essar's 33% stake for $5 billion as per the agreement. However, the Essar group now plans to argue that since the 11% held in India is being bought by Vodafone it is subject to Reserve Bank regulations. 

"We are mindful of the new Reserve Bank of India guidelines and fully expect the current transaction to comply with them," Vodafone group spokesman Simon Gordon said. A spokesperson for Essar declined to comment on the matter citing a confidentiality agreement. 

Essar had claimed an additional facilitation fee of $500 million from Hutchison during the latter's negotiations with Vodafone. The group may be able to achieve a similar result with Vodafone too, said an industry analyst. 
For Vodafone, much is at stake. It has already locked horns with the Indian tax authorities that claim that the UK-based operator owes the state $2 billion in taxes. The Essar option also will come under similar scrutiny. 
"With the Essar group support and the option to set a benchmark, Vodafone's case in the Supreme Court could get a real boost," said an analyst, who asked not to be named. 

An Essar official said the amount payable for the domestically-held 11% would be subject to capital gains tax, but not the remaining 22% held in the Mauritius subsidiaries. 

Vodafone bought Hutchison's stake through a Cayman Islands company that held shares in a series of Mauritian companies. Given this situation, Vodafone may accept an additional payment to the Essar group as the lesser devil, the analyst said. source

Vodafone 3G at Zoozoo World

Spread across 1000 sq ft area the Zoozoo world will give customers a firsthand experience to try out a host of 3G services like high speed internet, video calling and better gaming experience.

Vodafone Essar Ltd, one of India’s leading cellular service providers, invites everyone to experience Vodafone’s 3G services at the exciting world of Super Zoozoo on 9th -10thApril & 16th - 17th April at Inorbit Mall, Malad and High Street Phoenix, Mumbai Respectively. This unique experience zone will give fans and visitors an opportunity to enter the fascinating world of Super Zoozoos, and enjoy the 3G services in an interactive and fun way.

Spread across 1000 sq ft area the Zoozoo world will give customers a firsthand experience to try out a host of 3G services like high speed internet, video calling and better gaming experience.

Speaking on the occasion, Anuradha Aggarwal, Vice President – Marketing, Brand Communication and Consumer Insights, “With this initiative we are giving our customers a chance to peep into their much loved Zoozoo’s world and letting them engage with the iconic Super Zoozoo. Here, they can also get a step closer to the ‘Faster, Smarter, Better’ world of Vodafone 3G services and experience it in a fun and interactive manner.”

Fans and visitors can get free pictures clicked with their much loved Super Zoozoo, play fun games, take home Zoozoo goodies and win exciting prizes. At the Zoozoo world, visitors can put on their dancing shoes at the ‘dance zone’ where Super Zooozoo will follow and copy your dance moves.

To create awareness for 3G, Vodafone has outlined a full 360-degree campaign that includes a good mix of print, television and outdoor. source

Vodafone kicks off Land Line Business

Vodafone is entering India's landline market, but only for business customers



Vodafone plans to enter the leased landline and business solutions space, competing with larger private peers Bharti Airtel, Reliance Communications, and Tata Communications .
Vodafone is looking at entering the country's landline market, but only for business customers. The market for domestic landline services is much smaller and less reliable, as most consumers prefer to use mobile services.
Last year December,Vodafone Essar joined hands withWipro to manage its fixed line telecom services business. Vodafone agrees that they are a late entrant in the business but that puts them in an advantageous position of nothing to lose. Vodafone’s entry may intensify price wars in the enterprise business just like new entrants in the mobile telephony space did since late 2008.
Although landline costs have been falling by around 10-15% per year as the competition is increasing, it is still favorable compared to the cut-throat competition in the mobile market where tariffs have halved over the past two years.
With the retail customer tariffs down to one paisa per second, enterprise businesses presents high margin data revenue for telecom operators. Unlike mobile telephone call rates that have halved over the last two years, telephony solutions for enterprises have been falling 10-15 % every year.
The financial year which end in March 2016, enterprise business would account for nearly 20% of the company’s revenue. In October-December, the quarter revenue of Vodafone Essar was approximately 7,126 crore, UK-based parent Vodafone Group said and did not disclose the profitability of the region. It will also give preference to the enterprise customers on its 3G services to be launched before March-end. Vodafone Essar bought 3G airwaves in nine service areas for 11,618 crore in a government auction last year. The service is expected to bring about more profit-making data business to telecom operators.
Vodafone across the globe have been quite an upfront in innovations. In Netherlands, Vodafone is the first telecom operator to offer 'VastOpMobiel' in which entrepreneurs can receive fixed line phone calls on their mobile without the need to have a fixed line subscription and redirecting. With 'VastOpMobiel', they can be reached anywhere, anytime, and savings can be as high as 50% of the cost of a landline subscription.
In the landline business in India, Vodafone is offering free connection, free local, national calls, and free calls to Vodafone mobiles from your fixed line and a simple flat rate for calls to non-Vodafone mobiles ie 20c per minute.source

Mobile money transfer service wins award

VODAFONE's mobile transfer services including M-PAiSA in Fiji scooped the Mobile Money for the Unbanked award at this year's Global Mobile Awards in Barcelona, Spain.

M-PESA in Kenya, Tanzania and South Africa in association with M-PAiSA in Fiji, Afghanistan and India, and Vodafone Money Transfer out of Qatar came out tops at the event this week.

The awards are part of the annual Mobile World Congress which brings together players in the global telecom market and is organised by the Global System for Mobile Communications Association (GSMA).

The category topped by M-PESA and M-PAiSA recognised innovative, sustainable, pioneering mobile money services around the world that brought low-cost financial services, through mobile, within the reach of low income groups.

The award also recognised the mobile money service that has had the most significant impact on unbanked customers in developing markets over the last year.

"This year's entry, put together jointly with Vodafone, covered M-PAiSA in Fiji, M-PESA in Kenya, Tanzania, South Africa, M-Paisa in Afghanistan and India, and Vodafone Money Transfer in Qatar, bringing together the strengths and benefits of the service to the firm's customers across the group," a Vodafone statement said.

"The success story continues," the judges said in their citation.

"This solution is enhanced further with the addition of new features and territories.

"It is winning ground in a way seldom seen in the mobile industry and is a true and sustained success story."

The GSMA represents the interests of the worldwide mobile communications industry.

Spanning 219 countries, the GSMA united nearly 800 of the world's mobile operators, as well as more than 200 companies in the broader mobile ecosystem, including handset makers, software companies, equipment providers, internet companies, and media and entertainment organizations.

For M-PAiSA and Vodafone Fiji, this marks a second, in terms of such recognition, at an international level. M-PAiSA was short-listed as one of the five finalists at the Global Mobile Money Transfer awards in Dubai in November 2010.

"We have been confident of the prospects and range of possibilities with M-PAiSA," Vodafone Fiji M-PAiSA product manager Shailendra Prasad said.

"The recognition at the highest echelons is testament to the ingenuity and effectiveness of this service particularly for taking basic financial services to the unbanked. "With over 310,000 customers adopting this service in seven months it is an indication of how desperate people have been for the launch of such a service.

"Whilst there is still work to be done particularly in improving M-PAiSA footprints and accessibility in rural areas.

"For a completely new product in a market the size of Fiji the results are very promising indeed."

Mr Prasad said the results so far had been most satisfying with more than $4 million in transactions to-date.

M-PAiSA now offers a range of business to customer (B2C) and customer to business (B2C) payment options such as bill pay, loan payments, wage and salaries payment and even payment for any goods and services that can be customised to individual business needs.source

Vodafone says - Auctioning is the only way out of 2G mess

 

Vodafone Essar has told the Department of Telecom that auctioning 2G spectrum is the only right way forward to deal with the current mess. The mobile phone company said that recommendation by the telecom regulator to price spectrum based on calculations was incorrect and unjustifiable.

“Even though the one-man committee has criticised DoT for not implementing the 2003 decision of the Cabinet to move to auctioning of spectrum….even today the TRAI refuses to advice to move to an auction model and has come out with an arbitrary and flawed administrative way of charging for spectrum, designed to aggravate the discrimination between different operators,” the Vodafone letter to DoT Secretary said.

“We believe that there is only one way out of this mess viz. allocation of spectrum through transparent auctions. In respect of an administrative approach to address legacy issues, we believe that it at all it has to be applied, the only acceptable way forward will have to be a solution that is anchored around on uniformly applied principles — i.e. no distinctions between below and beyond 6.2 Mhz or between GSM and CDMA,” it said.

The TRAI has suggested that the Government should collect a one-time fee from operators with 2G spectrum at the rate of Rs 1,769 crore per Mhz of spectrum up to 6.2 Mhz and Rs 4,571 crore per Mhz for anything beyond that. This will cost the telecom firms about Rs 16,000 crore, according to Government estimates. Over the next few years, this could go up to Rs 40,000 crore, when the operators go for renewing their licences

Vodafone said that the TRAI had not granted a hearing. The company said that TRAI has no powers to impose retrospective charges for spectrum already allocated.

Last week, Reliance Communications had come out saying that the TRAI recommendations benefitted incumbent operators such as Vodafone as it had reduced the per Mhz price compared with the May 2010 proposals. In May last year, TRAI had said that 2G spectrum should be priced on a pro-rata based on 3G auction price.source