Vodafone's Indian takeover chances improve

THE QUAGMIRE that has become Vodafone's bid to enter the Indian cellular market has improved slightly. Rival Essar's chances of gaining victory have declined.

Documents which cover Essar's first right of refusal should Hutchison decide to sell its stake in India's fourth largest mobile operator appear to exclude a stake sold to a non-Indian company.

So Vodafone should be alright. But Essar might still decide to fight the issue, thus delaying any sale by Hutchison.

It's becoming more and more obvious why such a fierce fight has emerged for a controlling an operator which is a mere fourth largest player in its market.

India has overtaken China as the fastest growing cellular market. It gained 6.8 million new subscribers in November alone bringing the total to about 145 million. But the population is around 1.3 billion.

The catch is that around two thirds of India's population live outside the major cities. So, in order to be successful, Hutchison Essar will need a company which knows how to roll out a network nice and cheaply.

That company could be Vodafone, of course. However, Vodafone's ability to source handsets on a global basis looks like helping very little.

As suppliers like Nokia and LG have started to build their handsets for as little as $35 in Indian factories, that doesn't give Vodafone much room to manoeuvre with handset vendors over price.

Vodafone is also facing yet another competitor for Hutchison Essar. This time it is Hinduja - an Indian company best known in Blighty for a passport scandal involving Peter Mandelson.

Some observers argue that a big conglomerate like Hinduja knows little about running a mobile phone network. They seem to forget that Hutchison itself is a big conglomerate with a very wide range of holdings. µ

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