Vodafone Group plc
) has reportedly announced the purchase of an 11% stake in
Vodafone India from minority partner Piramal Enterprises Ltd.
According to Bloomberg, the deal was settled for 89 billion
rupees ($1.5 billion), resulting in the full takeover of Vodafone
According to reports, the company had earlier purchased the
4.5% stake retained by non-executive chairman of Vodafone India,
Analjit Singh. This gives Vodafone Group complete hold over its
The sale of stake in Verizon Wireless of
Verizon Communications Inc.
) for $130 billion increased Vodafone's focus on emerging markets
like India. The company is not only increasing its investment but
has also entered into various acquisition deals to strengthen its
market penetration in India. Aside from Vodafone India's stake
purchase, the company is also rumoured to be in talks to buy
Indian broadband and telecommunication company, Tata Teleservices
Vodafone has consistently proven its proactive approach to
Indian operations. The company registered 4.9 million net
customer additions in the fourth quarter, resulting in 160
million customers that represent 38% of its total customer
With increasing number of customers seeking data services,
strong marketing campaign and flexible price plans, Vodafone
expects continued growth in the sub-continent. Further, the
company views India as a bankable target market with 700 million
untapped customers in mobile financial services.
In a visit to India last year, CEO Vittorio Colao
highlighted the company's $3 billion investment plan over the
next two years for telecom infrastructural development in the
We believe the new rules set by Indian authorities in August
to beef up foreign direct investment into the country has opened
doors for multinational telcos like Vodafone for expanding in a
big way and gain complete ownership in incumbent companies that
was previously capped at 74%. Further, new and easy policies in
India related to spectrum, merger and acquisitions as well as
auctions remain attractive for foreign telecom companies to
invest in the prospective region.
Taking advantage of the new rule, Vodafone is aggressively
trying to be the country's numero uno carrier by acquiring
smaller players. Further, rating agency Fitch upgraded its
outlook on the Indian telecom sector last year and highlighted
industry consolidation, with large companies taking over smaller
counterparts. We believe Vodafone's buyout plan is in concurrence
with this trend.
Vodafone currently has a Zacks Rank #5 (Strong Sell).
Other stocks that can be considered in the telecom sector
SK Telecom Co. Ltd.
Shenandoah Telecommunications Co
). Both stocks carry a Zacks Rank #1 (Strong Buy).
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