Vodafone Essar, formerly Hutchison Essar, is a
cellular operatorA mobile network operator , also known as mobile phone operator , carrier service provider , wireless service provider, wireless carrier, or cellular company, or mobile network carrier is a telephone company that provides services for mobile phone subscribers.One essential...
in
IndiaIndia , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
that covers 23 telecom circles in India. It is based in
MumbaiMumbai , formerly known as Bombay in English, is the capital of the Indian state of Maharashtra. It is the most populous city in India, and the fourth most populous city in the world, with a total metropolitan area population of approximately 20.5 million...
. On July 2011, Vodafone Group agreed terms for the buy-out of its partner Essar from its Indian mobile phone business. The UK firm paid $5.46 billion to its Indian counterpart to take Essar out of its 33% stake in the Indian subsidiary. It will leave Vodafone owning 74% of the Indian business, while the other 26% will be owned by Indian investors, in compliance with Indian law. It is the second largest
mobile phoneA mobile phone is a device which can make and receive telephone calls over a radio link whilst moving around a wide geographic area. It does so by connecting to a cellular network provided by a mobile network operator...
operator in terms of revenue behind
Bharti AirtelBharti Airtel Limited , commonly known as Airtel, is an Indian telecommunications company that operates in 20 countries across South Asia, Africa and the Channel Islands. It operates a GSM network in all countries, providing 2G or 3G services depending upon the country of operation...
, and third largest in terms of customers. Vodafone had about 134.5 million customers as of February 2011.
On 11 February, 2007, Vodafone agreed to acquire the controlling interest of 67% held by
Li Ka ShingSir Ka-shing Li, GBM, KBE, JP is a Chinese business magnate based in Hong Kong. He is the richest person of East Asian descent in the world and the eleventh richest person in the world with an estimated wealth of US$26.0 billion on 10 March 2011...
Holdings in Hutch-Essar for US$11.1 billion, pipping
Reliance CommunicationsReliance Communications Ltd. is an Indian broadband and telecommunications company headquartered in Navi Mumbai, India. RCOM is the world's 16th largest mobile phone operator with over 144 million subscribers. Established on 2004, a subsidiary of the Reliance Group...
, 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 8 May, 2007. Despite the official name being Vodafone Essar, its products are simply branded Vodafone. It offers both
prepaidPrepaid refers to services paid for in advance. Examples include postage stamps, tolls, transit cards like the Greater London Oyster card, pay as you go cell phones, and stored-value cards such as gift cards and preloaded credit cards like American Express...
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 Essar will launch
3G3G or 3rd generation mobile telecommunications is a generation of standards for mobile phones and mobile telecommunication services fulfilling the International Mobile Telecommunications-2000 specifications by the International Telecommunication Union...
services in the country in the January-March quarter of 2011 and plans to spend up to $500 million within two years on its 3G networks.
Hutchison Essar (1992-2007)
In 1992,
Hutchison WhampoaHutchison Whampoa Limited or HWL of Hong Kong is a Fortune 500 company and one of the largest companies listed on the Hong Kong Stock Exchange. HWL is an international corporation with a diverse array of holdings which includes the world's biggest port and telecommunication operations in 14...
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
MumbaiMumbai , formerly known as Bombay in English, is the capital of the Indian state of Maharashtra. It is the most populous city in India, and the fourth most populous city in the world, with a total metropolitan area population of approximately 20.5 million...
) and launched commercial services as Hutchison Max in November 1995. In Delhi, Uttar Pradesh (East), Rajasthan and Haryana,
Essar GroupThe Essar Group is a multinational conglomerate corporation in the sectors of Steel, Energy, Power, Communications, Shipping Ports & Logistics as well as Construction head quartered at Mumbai, India...
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 UserAverage revenue per user usually abbreviated to ARPU is a measure used primarily by consumer communications and networking companies, defined as the total revenue divided by the number of subscribers....
(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 Hi" stands out visibly though it uses only white letters on red background. Another successful ad campaign in 2003 featured a
pug named CheekaCheeka is a pug who appeared in the "You & I" advertising campaign of Hutch's cellular service in India, along with the child actor Jayaram. The dog follows the boy in unlikely locations, prompting the tagline, "Wherever you go, our network follows." The duo first appeared on TV, billboards,...
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. The brand subsequently introduced
ZooZooKokok are advertisement characters promoted by Vodafone since the Indian Premier League Season 2 . ZooZoos are white creatures with ballooned bodies and egg heads who are used to promote various value added services of Vodafone. Although these characters look animated, they are actually humans in...
s which gained even higher popularity than was created by the Pug. Vodafone's creative agency is O&M while Harit Nagpal was the Marketing Director during the various phases of it's brand evolution.
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
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 PradeshMadhya Pradesh , often called the Heart of India, is a state in central India. Its capital is Bhopal and Indore is the largest city....
circle, as well as in Orissa, Assam, North East and Bihar.
Vodafone acquires Essar's Stake
On March 31, 2011,
Vodafone Group PlcVodafone Group Plc is a global telecommunications company headquartered in London, United Kingdom. It is the world's largest mobile telecommunications company measured by revenues and the world's second-largest measured by subscribers , with around 341 million proportionate subscribers as of...
announced that it would buy an additional 33% stake in its Indian joint venture for $5 billion after partner
Essar GroupThe Essar Group is a multinational conglomerate corporation in the sectors of Steel, Energy, Power, Communications, Shipping Ports & Logistics as well as Construction head quartered at Mumbai, India...
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 optionA put or put option is a contract between two parties to exchange an asset, the underlying, at a specified price, the strike, by a predetermined date, the expiry or maturity...
over 22% of the venture. Vodafone exercised its
call optionA call option, often simply labeled a "call", is a financial contract between two parties, the buyer and the seller of this type of option. The buyer of the call option has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument from the seller...
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 IndiaThe Reserve Bank of India is the central banking institution of India and controls the monetary policy of the rupee as well as US$300.21 billion of currency reserves. The institution was established on 1 April 1935 during the British Raj in accordance with the provisions of the Reserve Bank of...
's permission as well as valuation of the deal.
- REDIRECT Vodafone-Hutch Deal Tax Case
Vodafone-Hutchison Tax Case
Vodafone is embroiled in a $2.5 billion tax dispute with the Indian Income Tax Department over its purchase of Hutshison Essar Telecom services in April 2007. It is being alleged by the Indian Tax authorities that the transaction involved purchase of assets of an Indian Company, and therefore the transaction, or part thereof is liable to be taxed in India.
Vodafone Group Plc. entered India in 2007 through a subsidiary based in the Netherlands, which acquired Hutchison Telecommunications International Ltd’s (HTIL)
Hutchison Telecommunications International LimitedHutchison Telecommunications International Limited is a leading global provider of telecommunications services. The Group currently offers mobile and fixed-line telecommunication services in Hong Kong and Israel, and operates mobile telecommunications services in Indonesia, Vietnam, Sri Lanka and...
stake in Hutchison Essar Ltd (HEL)—the joint venture that held and operated telecom licences in India. This Cayman Islands transaction, along with several related agreements, gave Vodafone control over 67% of HEL and extinguished Hong Kong-based Hutchison’s rights of control in India, a deal that cost the world’s largest telco $11.2 billion at the time.
The crux of the dispute till now has been whether or not the Indian Income Tax Department has jurisdiction over the transaction. Vodafone has maintained from the outset that it is not liable to pay tax in India, and even if tax were somehow payable, then it should be Hutchison to bear the tax liability.
The Supreme Court of India has concluded the final hearing on the case and the judgment will be issued soon. The verdict is likely to have a bearing on investment flows into India. China has since changed its laws to ensure that transactions of this nature fall within its tax web.
3G
On 19 May 2010, the 3G spectrum auction in India ended. Vodafone paid 11617.86 million (the second highest amount in the auctions) for spectrum in 10 circles. The circles it will provide 3G in are
DelhiDelhi , officially National Capital Territory of Delhi , is the largest metropolis by area and the second-largest by population in India, next to Mumbai. It is the eighth largest metropolis in the world by population with 16,753,265 inhabitants in the Territory at the 2011 Census...
,
Kanpur,
Gujarat,
HaryanaHaryana is a state in India. Historically, it has been a part of the Kuru region in North India. The name Haryana is found mentioned in the 12th century AD by the apabhramsha writer Vibudh Shridhar . It is bordered by Punjab and Himachal Pradesh to the north, and by Rajasthan to the west and south...
,
KolkataKolkata , formerly known as Calcutta, is the capital of the Indian state of West Bengal. Located on the east bank of the Hooghly River, it was the commercial capital of East India...
,
MaharashtraMaharashtra is a state located in India. It is the second most populous after Uttar Pradesh and third largest state by area in India...
&
GoaGoa , a former Portuguese colony, is India's smallest state by area and the fourth smallest by population. Located in South West India in the region known as the Konkan, it is bounded by the state of Maharashtra to the north, and by Karnataka to the east and south, while the Arabian Sea forms its...
,
MumbaiMumbai , formerly known as Bombay in English, is the capital of the Indian state of Maharashtra. It is the most populous city in India, and the fourth most populous city in the world, with a total metropolitan area population of approximately 20.5 million...
,
Tamil NaduTamil Nadu is one of the 28 states of India. Its capital and largest city is Chennai. Tamil Nadu lies in the southernmost part of the Indian Peninsula and is bordered by the union territory of Pondicherry, and the states of Kerala, Karnataka, and Andhra Pradesh...
,
Uttar PradeshUttar Pradesh abbreviation U.P. , is a state located in the northern part of India. With a population of over 200 million people, it is India's most populous state, as well as the world's most populous sub-national entity...
(East) and
West BengalWest Bengal is a state in the eastern region of India and is the nation's fourth-most populous. It is also the seventh-most populous sub-national entity in the world, with over 91 million inhabitants. A major agricultural producer, West Bengal is the sixth-largest contributor to India's GDP...
.
Vodafone also operates 3G services in
Keralaor Keralam is an Indian state located on the Malabar coast of south-west India. It was created on 1 November 1956 by the States Reorganisation Act by combining various Malayalam speaking regions....
,
Andhra PradeshAndhra Pradesh , is one of the 28 states of India, situated on the southeastern coast of India. It is India's fourth largest state by area and fifth largest by population. Its capital and largest city by population is Hyderabad.The total GDP of Andhra Pradesh is $100 billion and is ranked third...
and Uttar Pradesh (West) through an agreement with
IdeaIdea Cellular, usually referred to as Idea, is an Indian wireless telecom company based in Mumbai, India. Idea is the 3rd largest mobile services operator in India, in revenue terms, and recorded of over 98.4 million customers as of August 2011....
and in
KarnatakaKarnataka , the land of the Kannadigas, is a state in South West India. It was created on 1 November 1956, with the passing of the States Reorganisation Act and this day is annually celebrated as Karnataka Rajyotsava...
through an agreement with Airtel.. This gives Vodafone a 3G presence in 13 out of 22 circles in India.
On 16 March, 2011, Vodafone launched 3G services in Uttar Pradesh (East) in the city of
LucknowLucknow is the capital city of Uttar Pradesh in India. Lucknow is the administrative headquarters of Lucknow District and Lucknow Division....
. Vodafone had already launched limited 3G services in
ChennaiChennai , formerly known as Madras or Madarasapatinam , is the capital city of the Indian state of Tamil Nadu, located on the Coromandel Coast off the Bay of Bengal. Chennai is the fourth most populous metropolitan area and the sixth most populous city in India...
and
DelhiDelhi , officially National Capital Territory of Delhi , is the largest metropolis by area and the second-largest by population in India, next to Mumbai. It is the eighth largest metropolis in the world by population with 16,753,265 inhabitants in the Territory at the 2011 Census...
earlier, but the Uttar Pradesh (East) launch counts as its first fully commercial launch. This makes Vodafone the fifth private operator (seventh overall) to launch its 3G services in the country following
Tata DocomoTATA DoCoMo, referred to as DoCoMo , is a Tata Teleservices Limited owned cellular service provider on the GSM and CDMA platform-arising out of the Tata Group's strategic joint venture with Japanese telecom giant NTT Docomo in November 2008...
,
Reliance CommunicationsReliance Communications Ltd. is an Indian broadband and telecommunications company headquartered in Navi Mumbai, India. RCOM is the world's 16th largest mobile phone operator with over 144 million subscribers. Established on 2004, a subsidiary of the Reliance Group...
, Airtel and
AircelAircel group is a mobile phone service provider in India. It offers both prepaid and postpaid GSM cellular phone coverage throughout India. The Aircel group is a joint venture between Maxis Communications Berhad of Malaysia and Sindya Securities & Investments Private Limited, whose current...
.
On 23rd June, 2011 Vodafone launched 3G service in Kerala by joining with Idea in an Intra Circle Roaming agreement. Initially Vodafone 3G services will be available in the following cities in Kerala – Ernakulam, Aluva, Calicut, Koyilandy, Alappuzha, Cherthala, Malappuram and Manjeri.
Subscriber Base
Following is the Vodafone Essar subscriber base statistics as on June 2011.
Subscriber Base Statistics as on January, 2011
| Telecom Cicle |
No. of Subscribers |
| Gujarat |
1,49,10,573 |
| Uttar Pradesh(East) |
1,42,37,217 |
| Maharashtra |
1,19,62,824 |
| West Bengal |
1,10,40,815 |
| Tamil Nadu |
93,30,557 |
| Rajasthan |
87,11,277 |
| Uttar Pradesh(West) |
92,34,369 |
| Andhra Pradesh |
73,47,024 |
| Delhi |
77,88,376 |
| Kanpur |
71,34,576 |
| KARNATAKA |
65,91,039 |
| Kerala |
55,35,177 |
| Bihar |
52,44,148 |
| Kolkata |
43,73,647 |
| Punjab |
41,32,392 |
| Haryana |
41,70,943 |
| Madhya Pradesh |
31,35,580 |
| Chennai |
21,13,992 |
| Orissa |
23,38,159 |
| Assam |
16,50,109 |
| North East |
8,61,826 |
| Jammu & Kashmir |
5,65,253 |
| Himachal Pradesh |
3,57,430 |
| Mumbai |
58,87,113 |
Total number of Vodafone Essar Subscribers : 14,15,19,840, i.e. 23.63% of the total 59,87,79,674 Indian mobile phone subscribers.
Source : http://coai.in/statistics.php
Competitors
Vodafone competes with 14 other mobile operators throughout India. They are
AircelAircel group is a mobile phone service provider in India. It offers both prepaid and postpaid GSM cellular phone coverage throughout India. The Aircel group is a joint venture between Maxis Communications Berhad of Malaysia and Sindya Securities & Investments Private Limited, whose current...
, Airtel, Cheers Mobile, BSNL,
IdeaIdea Cellular, usually referred to as Idea, is an Indian wireless telecom company based in Mumbai, India. Idea is the 3rd largest mobile services operator in India, in revenue terms, and recorded of over 98.4 million customers as of August 2011....
,
Loop MobileLoop Mobile , usually referred to as LOOP is a mobile phone service provider in India. It offers both prepaid and postpaid GSM cellular phone coverage in Assam, Kolkata, North East, Mumbai, Madhya Pradesh, Haryana, Orissa, Punjab, Rajasthan after receiving a license to operate across 21 telecom...
, MTNL, MTS, Ping Mobile,
Reliance CommunicationsReliance Communications Ltd. is an Indian broadband and telecommunications company headquartered in Navi Mumbai, India. RCOM is the world's 16th largest mobile phone operator with over 144 million subscribers. Established on 2004, a subsidiary of the Reliance Group...
,
S TelS Tel Private Limited is a GSM based cellular operator in India. It has a unified services access license in Orissa, Bihar, Himachal Pradesh, North East, Assam and Jammu & Kashmir...
,
Tata DoCoMoTATA DoCoMo, referred to as DoCoMo , is a Tata Teleservices Limited owned cellular service provider on the GSM and CDMA platform-arising out of the Tata Group's strategic joint venture with Japanese telecom giant NTT Docomo in November 2008...
,
Tata IndicomTata Teleservices Limited is a Indian broadband and telecommunications provider based in Mumbai, India. It is a subsidiary of the Tata Group, an Indian conglomerate...
,
UninorUninor is a mobile operator in India. The company holds Unified Access Service licences to offer mobile telephony services in each of India’s 22 telecom circles, and has received spectrum to roll out services in 21 of these...
, Videocon and
Virgin MobileVirgin Mobile India Limited is a cellular telephone service provider company which is a joint venture between Tata Teleservices and Richard Branson's Virgin Group. Currently, the company uses Tata's CDMA network to offer its services under the brand name Virgin Mobile, and it has also started GSM...
.
External links