British multinational Vodafone plans to invest nearly US $1 billion to develop its operations in India. Investments will mainly focus on upgrading the operator’s network and retail stores across India. According to Vodafone India CEO Marten Pieters, the company plans within the next two years to upgrade its network and expand 3G coverage to every service area in the country, doubling its current coverage. In addition, it intends to conduct 4G/LTE service tests in 2015. Vodafone now has 169 million customers in India, making it the second-largest operator by subscriber base, after Airtel. In 2013, Vodafone India’s revenues amounted to INR 376 billion (US $6.1 billion). Its ARPU is INR 203 (US $3.29) per month.
This past February, Vodafone sold its 45 percent stake in U.S. operator Verizon Wireless for US $130 billion, reducing its own value by half to ready itself for an ambitious expansion plan outside its core markets in Europe. It is using cash from that transaction to fund its investment in India, which Pieters characterized as the fastest-growing smartphone market in the world. While Indian customers currently spend a minuscule amount of money per month on mobile services compared to customers in Europe or the U.S., they are poised to dramatically increase their levels of spending, while in the highly-developed markets, ARPU is heading steadily downward. India is expected to eventually surpass the saturated U.K. as Vodafone’s largest source of revenue.
Vodafone’s expansion of 3G and eventually 4G is intended to drive data consumption, and it will very likely have that effect. One reason, beyond the general worldwide trend toward ever-greater data hunger, is that as a large and mostly rural nation, India is ripe for the development of online and especially mobile-based commerce. Challenges facing Vodafone India in the months ahead include qualifying for enough spectrum in forthcoming auctions and funding the necessary upgrades in the face of low revenue. India may be the future, but ushering that future in will be far from easy, even for a giant like Vodafone.
The above item appeared in a recent issue of Tarifica's "The Story of The Week", a weekly report that analyzes noteworthy developments in the telecoms industry from around the world. For past issues or to learn more about The Story of The Week : Story Of The Week
The Tarifica Telecom Industry Research Department