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Flush with funds, Vodafone may bid aggressively in auctions

Vodafone Group may use proceeds from Verizon deal to strengthen data operations in India under Project Spring.

, ET Bureau|
Updated: Sep 12, 2013, 03.10 PM IST
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British company Vodafone Group may use proceeds from Verizon deal to strengthen data operations in India under Project Spring.
British company Vodafone Group may use proceeds from Verizon deal to strengthen data operations in India under Project Spring.
NEW DELHI: UK's Vodafone Group Plc. could be a major player in the upcoming spectrum auctions in India, and would also focus on strengthening its data services as part of its “Project Spring” strategy to utilise cash from its $130 billion-deal with US’s Verizon, say analysts.

Under “Project Spring”, Vodafone plans to increase its capital expenditures by $9 billion over the next three financial years, mainly to improve the quality of its network and focus on wireless broadband for subscribers in Europe and emerging markets such as India and South Africa.

Vodafone India could “ramp up its capex spending approach; strengthen its position in the data market by focusing on 3G services; and undertake more active participation in upcoming spectrum auctions, particularly 3G/4G,” brokerage Goldman Sachs said in a report.

Flush with funds, Vodafone may bid aggressively in auctions

Capital expenditure by India’s second largest mobile phone company dipped to 12% of its annual revenue for the last fiscal year ended March 31, from 28% in fiscal year through March 2010, the report said. “In India, we expect the company to use the cash proceeds to strengthen its existing 2G/3G footprint and fiber backbone,” it added.

A Mumbai-based analyst said that Vodafone India is likely to bid “strongly” to garner airwaves in the 1800 Mhz band as “more spectrum means more capacity”.

In the long term, it could also look at bandwidth in the 700 Mhz and 900 Mhz bands to provide high speed wireless internet business which will be the driver of future growth for India’s telecom service providers, he said.

In the short term, Vodafone India can use bandwidth in the 1800 Mhz to augment its 2G data services. Only 10% of 870 million people who own mobile phones are smartphone users in the country, indicating the potential growth of data services in the country.

“The company could develop its Wi-Fi strategy or create hot spots, but they need to figure out a way to monetise such offerings as traditionally these zones are free,” the analyst said.

India is among Vodafone’s fastest growing markets but also one where it has had to deal with intense competition as well as tax disputes with authorities. It is still betting on the country, especially given the potential data explosion. Smartphone sales have been growing exponentially in India.

According to research firm IDC, smartphone shipments in India almost tripled in the second quarter of 2013 from a year earlier, to 9.3 million units. The growth was over 50% sequentially. Vodafone India has also ridden the data usage wave. It saw revenue from its data services grow nearly 84% on year to Rs 737.2 crore in the three months to June 30.
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