Vodafone Essar

Vodafone Essar, commonly referred to as Vodafone, is a cellular operator in India that

covers 23 telecom circles in India. It was formerly known as Hutchison Essar. It is based
in Mumbai. Vodafone Essar is the Indian subsidiary of Vodafone Group. Formerly, 33%
share in the firm was owned by Essar Group. Vodafone Group bought out the 33% stake
of Essar Group for $5 billion to became the sole owner of the firm. It is the second largest
mobile phone operator in terms of revenue behind Bharti Airtel, and third largest in terms
of customers. Vodafone had about 134.5 million customers as of February 2011.

On February 11, 2007, Vodafone agreed to acquire the controlling interest of 67% held
by Li Ka Shing Holdings in Hutch-Essar for US$11.1 billion, pipping Reliance
Communications, Hinduja Group, and Essar Group, which is the owner of the remaining
33%. The whole company was valued at USD 18.8 billion. The transaction closed on
May 8, 2007. Despite the official name being Vodafone Essar, its products are simply
branded Vodafone. It offers both prepaid and postpaid GSM cellular phone coverage
throughout India with good presence in the metros.

Vodafone Essar provides 2.75G services based on 900 MHz and 1800 MHz digital GSM
technology. Vodafone recently launched 3G services in the country and has plans to
spend up to $500 million within two years on its 3G networks.

History

Hutchison Essar (1992-2007)

In 1992, Hutchison Whampoa and its Indian business partner – Max Group, established a
company that in 1994 was awarded a licence to provide mobile telecommunications
services in Bombay (now Mumbai) and launched commercial services as Hutchison Max
in November 1995. In Delhi, Uttar Pradesh (East), Rajasthan and Haryana, Essar Group
was the major partner. But later Hutch took the majority stake.

By the time of Hutchison Telecom's Initial Public Offering in 2004, Hutchison Whampoa
had acquired interests in six mobile telecommunications operators providing service in 13
of India's 23 licence areas and following the completion of the acquisition of BPL Mobile
that number increased to 16. In 2006, it announced the acquisition of a company (Essar
Spacetel — A subsidiary of Essar Group) that held licence applications for the seven
remaining licence areas.

Initially, the company grew its business in the largest wireless markets in India — in
cities like Mumbai, Delhi and Kolkata. In these densely populated urban areas it was able
to establish a robust network, well known brand and large distribution network – all vital
to long-term success in India. Then it also targeted business users and high-end post-paid
customers which helped Hutchison Essar to consistently generate a higher Average
Revenue Per User (ARPU) than its competitors. By adopting this focused growth plan, it
was able to establish leading positions in India's largest markets providing the resources
to expand its footprint nationwide.

In February 2007, Hutchison Telecom announced that it had entered into a binding
agreement with a subsidiary of Vodafone Group Plc to sell its 67% direct and indirect
equity and loan interests in Hutchison Essar Limited for a total cash consideration (before
costs, expenses and interests) of approximately $11.1 billion.

Hutch was often praised for its award winning advertisements which all follow a clean,
minimalist look. A recurrent theme is that its message Hello stands out visibly though it
uses only white letters on red background. Another successful ad campaign in 2003
featured a pug named Cheeka following a boy around in unlikely places, with the tagline,
Wherever you go, our network follows. The simple yet powerful advertisement
campaigns won it many admirers. Ads featuring the pug were continued by Vodafone
even after rebranding.

Timeline

1992: Hutchison Whampoa and Max Group establish Hutchison Max

2000: Acquisition of Delhi operations and entry into Calcutta (now Kolkata) and Gujarat
markets through Essar acquisition

2001: Won auction for licences to operate GSM services in Karnataka, Andhra Pradesh
and Chennai
A 'You and I' print advertisement of Hutch featuring Cheeka (dog)

2003: Acquired AirCel Digilink (ADIL — ESSAR Subsidiary) which operated in

Rajastan, Uttar Pradesh East and Haryana telecom circles and rebranded it 'Hutch'.

2004: Launched in three additional telecom circles of India namely Punjab, Uttar Pradesh
(West) and West Bengal.

2005: Acquired BPL Mobile operations in 3 circles. This left BPL with operations only in
Mumbai, where it still operates under the brand 'Loop Mobile'.

2007: Vodafone acquires a 67% stake in Hutchison Essar for $10.7 billion. The company
is renamed Vodafone Essar. 'Hutch' is rebranded to 'Vodafone'.

2008: Vodafone acquires the licences in remaining 7 circles and has starts its pending
operations in Madhya Pradesh circle, as well as in Orissa, Assam, North East and Bihar.
Vodafone acquires Essar's Stake

On March 31, 2011, Vodafone Group Plc announced that it would buy an additional 33%
stake in its Indian joint venture for $5 billion after partner Essar Group exercised an
option to sell the holding in the mobile-phone operator. The deal will raise Vodafone’s
stake to 75%. Essar will exit the company after it implemented a put option over 22% of
the venture. Vodafone exercised its call option to buy an 11% stake.

In 2007, Vodafone granted options to Essar that would enable the conglomerate to sell its
entire stake for $5bn, or to dispose of part of the 33 per cent shareholding at an
independently appraised fair market value. In January 2011, Vodafone objected to
Essar’s plans to place part of its 33% stake in India Securities, a small public company.
Vodafone feared the move would give an inflated market value to Vodafone Essar. It had
approached the market regulator SEBI and also filed a petition in the Madras High Court.

The final shareholding pattern post this deal was not provided by the company as it was
not clear whether Vodafone's stake would exceed the 74 per cent FDI limit. Indian laws
don't allow foreign companies to own more than 74% in a local mobile-phone operator.
Vodafone has assured it will comply with local rules. Vodafone will have to sell that 1%
to some Indian entity, or they’ll have to consider an initial public offering. Vodafone also
said that final settlement is anticipated to be completed by November 2011. The
completion of the deal would be subject to meeting certain conditions which include
Reserve Bank of India's permission as well as valuation of the deal.
Group Company wise % market share – Jan’2011

Sr. No. Name of Company Total Sub Figures % Market Share

1 Bharti Airtel 155,796,598 27.99%
2 Vodafone Essar 127,364,342 22.88%
3 IDEA 84,289,641 15.14%
4 BSNL 83,591,015 15.02%
5 Aircel 51,831,796 9.31%
6 Uninor 20,305,550 3.65%
7 Reliance Telecom 16,311,206 2.93%
8 Videocon 6,011,233 1.08%
9 MTNL 5,152,831 0.93%
10 Loop Mobile 3,062,120 0.55%
11 Stel 2,514,777 0.45%
12 Etisalat 452,574 0.08%
All India 556,683,683 100.00%

[Attaching the chart for Project Purpose]

% Market Share

Bharti Airtel
Vodafone Essar
IDEA
BSNL
Aircel
Uninor
Reliance Telecom
Videocon
MTNL
Loop Mobile
Stel
Etisalat
Subscriber Base

Following is the Vodafone Essar subscriber base statistics as on January, 2011.

Subscriber Base Statistics as on January, 2011

Telecom Cicle No. of Subscribers

Gujarat 13,929,246
Uttar Pradesh(East) 12,758,139
Maharashtra 10,228,352
West Bengal 9,369,243
Tamil Nadu 8,628,589
Rajasthan 8,364,850
Uttar Pradesh(West) 8,207,919
Andhra Pradesh 7,048,449
Delhi 6,708,922
Karnatka 6,268,492
Kerala 5,059,894
Bihar 4,717,640
Kolkata 4,107,931
Punjab 3,755,967
Haryana 3,618,145
Madya Pradesh 2,477,946
Chennai 1,988,675
Orissa 1,909,373
Assam 1,203,824
North East 695,598
Jammu & Kashmir 422,670
Himachal Pradesh 294,303

Total number of Vodafone Essar Subscribers : 127,364,342, i.e. 22.88% of the total
556,683,683 Indian mobile phone subscribers.
 PEST Analysis

[Have made the above image myself. Hope we can use if for the project]
Political/regulatory environment

Regulatory institutions well-developed among emerging market peers: TRAI

(Regulator) features
– Dynamic – recent consultations on 3G licensing, roaming and infrastructure sharing,
Mobile Number Portability
• Clear Government targets for tele-density driving high-level policy initiatives
• High levels of fees and taxes have been reduced to promote affordability and
increase in tele-density
• Sharing of passive infrastructure (sites, towers) permitted and encouraged by
government. TRAI is evaluating active network infrastructure sharing to underpin Tele-
density targets.
• Termination rate reduced.

Regulation-National Telecom Policy since 2004

2004 (Oct) Announcement of Broadband Policy to provide high speed

always on internet service.

2005 (Nov) FDI limit increased from 49% to 74% in Telecom Sector.

2005 (Dec) ILD & NLD Annual License fees reduced from 15% to 6%.

2007 (Oct) Dual technology allowed.

2008 (Aug) Issue of 3G guidelines for spectrum allocation through

auction. Foreign players allowed to bid.

2008 (Aug) Guidelines for Mobile Number Portability Service

License issued

2010 (Last Quarter) 3G Launched in Various Parts of India

2011(1st Quarter) Mobile Number Portability Started in India

Economic

 Gradual economic reform has delivered major cumulative change since 1991
 Reducing bureaucracy and state influence over business decisions
 Promoting competition by privatization and de-licensing key sectors
 Encouraging foreign investment into more sectors of economy
 World’s 2nd fastest growing economy
 Increasing Disposable Income
 High Per capita income-GDP Growth

Social

 The number of inhabitants in each of India (1103 million) and China (1316
million) was over a billion persons, and together these two countries represented
more than one third (37.4%) of the world's population.
 Demographic changes that will have a major impact on many areas of society
such as social systems, consumption patterns, education, and job markets in the
coming decades. People are living much longer and in better health.

Technological

[I am not getting points that need to be written here… Any of you guys, please add this]

Bibliography

Wikipedia
Official Vodafone India Website
http://www.worldofgprs.com
Google