3G Intra Circle Roaming (ICR) issue

Last week couple of news on 3G Intra Circle Roaming(ICR) arrangements in India raised the interests of the stakeholders. A brief background will help in understanding the issue better. Department of Telecom (DoT) who is the licencor and issues all telecom licences in India had earlier asked 3 Telecom service providers viz. Airtel, Idea and Vodafone to stop ICR based 3G services in the service areas where 3G spectrum was not assigned to them. In reaction to this, these 3 operators filed petitions in TDSAT (the tribunal which hears cases related to telecom in India). Incidentally the two members of TDSAT gave a split judgement. Subsequently DoT asked these operators to stop the 3G services based on ICR arrangements and even slapped penalties. The operators went to High Court and got a stay. Last week the stay has been vacated. To understand the issue of 3G ICR, the best is to go through the split judgement of TDSAT. To help the readers of this blog, I have summarized the same below. However I advise the readers to go through the original judgement so as to obviate any errors that may arise because of my understanding of the judgement. In case you are short of time, here you go ----

    Split Judgment by TDSAT on ICR dated 03.07.2012 - Finding the plea acceptable and valid, TDSAT Chairman Justice  S B Sinha allowed the operators’ plea against the government's directive to stop intra circle 3G roaming saying that it was violative of natural justice. The Petitions were allowed, the impugned orders dated 23.12.2011 was set aside with liberty to the Respondent to pass appropriate orders upon giving due opportunity of hearing to the Petitioner. However, differing in the decision taken, TDSAT Member P K Rastogi dismissed plea saying that the petitioners who have not got 3G spectrum allotted by the licensor in certain circles, cannot provide 3G services to its customers in those circles by way of making intra circle arrangement with the service providers having 3G spectrum. 

 Salient points deliberated in judgement delivered by TDSAT Member P K Rastogi

a.   On the principal question as to whether the petitioners having UASL/CMTS license along with 2G spectrum in certain circles can provide 3G services to its customers in these circles although 3G spectrum has not been allotted to them and whether such services can be provided by making intra circle roaming arrangements with operators having 3G spectrum in these circles, Member TDSAT has taken a view that the reading of cl. 2.2 (a)(i) of UASL shows that services to be provided by the licensee cover collection, carriage, transmission and delivery of voice and/or non-voice messages over licensee’s network in the designated service area and includes provision of all types of access services. In addition to this, except those services listed in para 2.2 (b)(i), licensee cannot provide any service which require a separate licence. Further he deliberated on the issue –“whether provision of 3G services requires a separate license”. On the issue, he is of the opinion that it is clear from the terms and conditions of license that the provision of 3G services cannot be provided without amendment to the UAS licence under Indian Telegraph Act, 1885 and without getting a license from WPC wing of DOT under Indian Wireless Act, 1933 for the relevant spectrum required to provide 3G services.  Thus, in his view, the provisions of 3G services require a separate license.  If the UASL licensee does not have separate license to provide 3G servies, it violate clauses 2.2(a) (i) and 2.2(b) (i) of the terms and conditions of the license.  

b.   3G services have been defined in the notice inviting applications (NIA) issued in connection with auction of 3G and BWA spectrum as “In case of successful bidders, services offered under the scope of respective service licenses using 3G/BWA spectrum assigned through the auction process.” Therefore, 3G services are those services which use 3G spectrum and 3G spectrum can be got through the process of auction only. In this petition, the petitioners have not got the 3G spectrum allocated to them in the impugned circles.

c.    On the question as to whether it is possible to provide 3G service by the petitioners to its subscribers by way of intra circle roaming arrangement with other operators having 3G spectrum, Member TDSAT has taken a view that the definition of ‘service’ and that of ‘subscriber’ show that the petitioner should have the license and the required network to provide particular type of service to its subscribers.  The petitioners have established only 2G network and have not setup 3G network which requires separate equipment and separate allocation of frequency. In case of intra-circle roaming, the roaming seeker should also have its home network and the licence for the spectrum for which it is providing service to its subscribers. Its subscribers can roam on the facility of roaming provider temporarily only and not permanently. Such arrangement is not permissible under the terms and conditions of license. In fact, UASL licensee without having the relevant (3G) spectrum providing 3G services to its subscribers will be acting as Mobile Virtual Network Operator (MVNO) where the service provider does not have its network in that frequency still provides services to the subscriber.  At present, MVNO is not part of government telecom policy and is specifically prohibited. The arrangement made between the parties are such that it specifically bars 2G roaming, and allows only 3G roaming for the subscribers of the roaming seekers i.e. petitioners herein. The roaming seeker neither has network nor the spectrum for 3G services. As the roaming seeker is providing 3G services by using the spectrum and network of the roaming provider, the Petitioner work like MVNO which is not permissible at present.

d.   In its judgment, Member TDSAT also quoted the terms and conditions of the roaming agreement entered by M/s TATA and Aircel and opined that the agreement indicates that the roaming provider having 3G spectrum have limited the usage of its 3G spectrum to the roaming seeker to certain percentage. This shows that the 3G spectrum is being earmarked to certain percentage for roaming seeker. Such arrangement of earmarking the part of the 3G spectrum allotted by a successful bidder to a service provider without any authorization by the licensor is not permissible.

e.    3G and 2G spectrum are allotted with different carrier sizes. While 3G spectrum (in 2100 MHz Frequency band) has been allotted with carrier size of 5 MHz; TDMA (2G)spectrum is allotted with carrier size of 200 KHz each for in 900 MHz/1800 MHz frequency band and 1.25 MHz each for CDMA in 800 MHz frequency band.

f.     On the issue of promissory estoppel that was raised by petitioners on the grounds that the DoT in its response to specific query in pre bid conference has said that roaming facility between 2G and 3G service will be available and once that commitment has been made the responses given by the DOT are definitely binding on the licensor, Member TDSAT was of the view that the doctrine of promissory estoppel cannot be invoked by a third party.  The petitioners in these petitions are not successful bidders in the auction. No contract was signed between the petitioners and the respondent.  Any response given during the process of auction cannot be binding on the licensor vis-à-vis these petitioners. As no promise has been made to these petitioners, the doctrine of promissory estoppel is not applicable. Therefore, the petitioners will not get any benefit out of the response given by DOT during the auction proceedings. The petitioners will be governed by their own license agreement. The query and responses are not in the nature of circular instructions of the department. The responses are for the purpose of auction of the 3G spectrum only. These responses cannot create any new right to the parties having effect of changing the terms and conditions of their licenses.

g.    On the issue of Natural Justice raised by Petitioner that the impugned communication of DoT dated 23.12.2011 to stop 3G services violated the principle as neither show cause notice was issued before the said communication by the Respondent nor any opportunity of hearing was given to the Petitioners, Member TDSAT has taken a view that various TERM cells of DoT had issued letters to the petitioners. Thus, they were well aware of the objections raised by the respondent at different points of time. The unsuccessful bidders did not get either the amendment to their licence or the allocation of 3G spectrum from the respondent.  It is not understood as to how the petitioner got any right to start 3G services.  The licensor did not confer any right to such effect. The show cause notice would have been necessary, if the petitioner were conferred any right to provide the 3G services to its customer under the licenses granted to it and the impugned letter of the respondent dated 23.12.2012 would have curtailed such rights.

GSM subscriber figures for Feb 2010 in India

I have never believed in these figures. But for sake of those who follow this blog, here are latest GSM customer acquisition figures in India.

As per data provided by the GSM operators' lobby Cellular Operators Association of India, the GSM mobile user base in India touched a little over 400 million (407 million). The country's GSM mobile subscriber base has increased by 13 million to 407 million in February, with Vodafone Essar adding the maximum number of new customers in the past month. This is, however, less than the total addition of 14.4 million users in January.

The country's second largest GSM player Vodafone Essar added as many as three million customers in the past month, closely followed by Bharti Airtel. Vodafone Essar's touched an user-base of 97 million. Airtel added 2.9 million users last month against 2.85 million in January taking its total mobile user base to 124 million. Bharti has a market share of 30.55 per cent, while Vodafone Essar has 23.84 per cent. Aditya Birla's Idea Cellular added 2.25 million new users during the month, taking its total subscriber base to 62 million. It has a market share of 14.96 per cent.

State-run BSNL and private operator Aircel added 1.5 million and 1.8 million new users respectively in the month with their user base at 61 million and 34 million each. BSNL's market share reached 14.96 per cent. The major gainer in the month has been MTNL which added 86,706 new users in February from 45,067 in January.
(Note - Figures are courtesy TRAI reports and Economic Times news)

In terms of mobile minutes, Bharti Airtel is world's fifth largest operator

Bharti Airtel has latched on to the position of the fifth largest wireless telco globally, ahead of carriers like Sprint Nextel and T-Mobile and Latin American major America Movil. Airtel could trump global operators in providing cheaper calls to its subscribers. The company is way ahead of its global competitors by providing lowest cost per minute of usage.

China Mobile claimed the numero uno position in a recent research report, with 726 billion mobile minutes, followed by Verizon with 226 billion mobile minutes, during the April-June 2009 quarter. AT&T came up third with 166 billion mobile minutes, while Vodafone was in fourth place with 156 billion mobile minutes during the same period. Comparing favourably with global telecom giants, Bharti carried 141 billion mobile minutes on its network, almost twice that of Vodafone Essar, which is not listed in India.

The lowest-cost producer of voice minutes globally ensures a superlative cost structure, which is a key hurdle for challengers and green-field telcos. Bharti Airtel compares favourably with global telecom giants and has carried a total of 140.7 billion voice minutes on its network in 1Q from a single country operation, compared to Vodafone’s total network minutes of 143.6 billion, generated from its operations spanning 30 countries.

Stampede of companies hoping to get new telco operating license (& hence the spectrum) in India

More than 500 companies have applied for new telco operating licenses in India. AT&T was one those who applied just before the closing bell for applications.
If AT&T should get the license, it would set the stage for a battle royale between it and Vodafone for a share of the world's fastest-growing cellular market.
AT&T's wireless unit, the former Cingular, is of course already in a death match in the United States with Vodafone because Vodafone owns 40 percent of Verizon Wireless. An extension of that battle to India, where cellular-phone use is growing at an estimated eight million subscribers per month, thus would have the industry worldwide on the edge of its seats.
Just to make things even more interesting, Sistema, the owner of Russia's largest wireless carrier, Mobile TeleSystems (MTS), also has applied for an Indian cellular license. There's also some suspicion that, buried in the pile of 500 applications, are papers from proxies for other Tier One cellular players on the world stage.
While DoT is scratching its head over how to decide which of the applicants should get licenses - it hadn't expected to need a process to sort through hundreds of applications. Planning is said to center around a two-stage procedure, most likely the initially weeding out those whose goal is to get a license simply to resell it, instantly becoming quite rich in the process.
What the flood of applicants wants is what's called a Universal Access Services Licence (UASL). Such a license, though, doesn't come with any spectrum; that will be a separate - and potentially expensive - issue. Indeed, there are said to be more than 20 Indian companies that last year were allowed to buy licenses, but they aren't in the cellular business yet because they haven't gotten any spectrum.
At this point, the Indian authorities haven't said exactly what spectrum they eventually will put on offer, although the widespread expectation is they will be looking at channels for 3G and possibly 4G service offerings.
In an almost identical arrangement, Vodafone is paired with India's Essar Group - having bought the Hutchison Telecommunications International Limited (HTIL) stake in what had been Hutchison-Essar earlier this year (TelecomWeb news break, Feb. 12). Vodafone-Essar, though, already is a licensed cellular carrier in India - with Number Three market share as is Idea, sitting in the sixth spot. In all, there are 13 wireless competitors in the market (10 of them offering GSM, three CDMA and one both), although most do not have licenses and spectrum that cover the entire country.
The list of applicants is known to include at least eight major real-estate firms in India.

Vodafone directors resigns from Bharti Airtel's Board

The two Vodafone directors on the Board of Bharti Airtel have left the company following its takeover of Hutch-Essar. Bharti Airtel chairman and managing director Sunil Mittal said that both the directors - Gavin Darby and Paul Donovan - have resigned. In January, the Vodafone directors had abstained from the Board meeting when Vodafone started its pursuit of Hutchison Telecom's stake in Hutch-Essar.

Bharti Airtel has also announced that it has crossed the 40 million-mobile customer milestone. With this, Bharti Airtel becomes the first Indian mobile services provider and it says, the 10th in the world to join an exclusive list of global telecom operators with more than 40 million customers from a single-country.
It took Airtel 11 years to reach the 20 million customer landmark and just another 13 months to add the next 20 million customers. The Company's overall wireless market share catapulted to over 23.2% as of April 2007 from 20.4% as reported in FY06.

Currently, Airtel is present in nearly 4,700 census towns and over 200,000 non-census towns and villages covering 59% of the country's population. The company plans to aggressively roll out more than 30,000 cell sites in FY08 to increase its population coverage to 70%."

Hutch Essar deal - Vodafone clears major hurdle

With Indian finance minister P Chidambaram giving his go-ahead, Vodafone seems to have cleared its last hurdle in acquiring a controlling stake in Hutch Essar. This approval comes within a week of the Foreign Investment Promotion Board giving its nod for the acquisition and should pave the way for Vodafone to secure management control of HEL and for the company to be renamed Vodafone Essar.

As per a leading finanacial daily " As a first step, Vodafone will now be able to constitute a new 12-member board to oversee the operations of the company. Essar vice-chairman Ravi Ruia will be the chairman of Vodafone Essar and Vodafone chairman Arun Sarin will be the vice-chairman. Max India chairman Analjit Singh and HEL MD Asim Ghosh will also be on the board."

The drama
The Vodafone-HEL regulatory saga, which saw the proposal being deferred thrice by FIPB, began in February soon after Vodafone announced it had agreed to acquire companies that controlled 67% in HEL from Hutchison Telecom for $11.1 billion. This had given rise to a controversy about whether the 15% held by Mr Singh, Mr Ghosh and IDFC should be counted as FDI. Besides, RBI and some government officials were reported to have initially opined that the 15% shareholding amounted to violation of FDI and Fema norms. However, the initial adverse views of some government departments were overruled by FIPB last week. This was after the law ministry, in its response to queries raised by the finance ministry, said Mr Singh and Mr Ghosh’s holdings did not amount to ‘benami’ transactions and were wholly Indian. Vodafone had also taken pains to clarify that it had directly acquired 52% in HEL along with options on stakes held by local partners which would give it what it described as ‘economic interests’ over the remaining 15%.

Curtain is yet to be closed...
What remains to be contended is a public interest litigation (PIL) filed by an NGO called Telecom Watchdog, which is pending in the Delhi High Court.

Airtel & Vodafone - Rivals(?) in India, Friends outside

Vodafone and Bharti Airtel are extending their alliance to markets abroad. Jersey Airtel and Guernsey Airtel, subsidiaries of Bharti Enterprises, on Tuesday announced that they have entered into an agreement with Vodafone to offer telecom services in Jersey and Guernsey (islands in Europe, close to UK) under the ‘Airtel-Vodafone’ brand name. [IS THIS AN INDICATION OF SHAPE OF THINGS TO COME IN INDIA AS WELL?]

Services in these islands are expected to be launched shortly. Last year, Bharti was granted licenses to operate 2G and 3G mobile services in Jersey and Guernsey. The tie-up will enable Airtel to bring in a range of Vodafone services, customised to the needs of customers in Jersey and Guernsey, the company said. These will include Vodafone Passport, a simple roaming price plan; Vodafone Simply, a straightforward voice and data package; Vodafone Mobile Connect Card for laptops, all brought to customers by Airtel. Also on offer will be a range of services for business customers.

Both Vodafone and Bharti enjoy a history of friendly ties. The UK-based cellular major had picked up a 10% stake in Bharti Airtel in September 2005, but is currently in the process of reducing its holdings to 4.4% after acquiring a controlling stake in Hutchison-Essar. Vodafone and Bharti had also entered into a comprehensive MoU in India recently for telecom infrastructure sharing. As per the MoU, Bharti Airtel will be the preferred vendor of Vodafone for national and international long distance services and leased line services. This will also see Vodafone give 50% of its in-bound international roaming traffic to Bharti Airtel for three years.

In fact, both Bharti and Vodafone are also looking at pooling their resources in future for a common network as part of their comprehensive range of infrastructure sharing options in India. If the reporting of one of the leading newspapers in India is to be believed Mr Mittal has already said - "Complete sharing of our existing networks cannot be ruled out,”

FIPB clears Hutch deal

India's Foreign Investment Promotion Board (FIPB) finally gave its blessing to Hutchison Telecommunications International Limited's (HTIL) $11.1 billion sale of its 52-percent controlling stake in Indian telco Hutchison Essar to Vodafone.
The group, Telecom Watchdog, charged that foreign ownership of Hutch-Essar actually is 89.03 percent, exceeding the 74-percent cap set by Indian law (TelecomWeb news break, March 9).
Still on the table, though, is a possible $1 million capital-gains tax the Indian government has been threatening to levy on HTIL.
Reports also indicate the drama surrounding the sale of control of HTIL may not be over, and that Vodafone has made another offer to buy Essar's 33-percent stake in the company on the same terms as it paid for the HTIL stake. Just how that would work, given India's foreign-ownership rules, remains to be seen.

Vodafone in India - The rough road ahead

Background

Vodafone, already the world's largest cellular carrier, is getting control of India's fourth-largest operator with about 24 million customers and 16.4 percent of the market. Vodafone says its target now is to garner between 20-percent and 25-percent market share by 2012. Assuming all needed regulatory approvals, the deal is expected to close in the second quarter. Hutch-Essar becomes Vodafone's third largest unit, following its German operations and its 45-percent minority stake in Verizon Wireless in the United States. However, the German and U.S. markets are mostly saturated - 80 percent in Germany and 76 percent in the United States - while the Indian market is only 15-percent penetrated, and it's the world's fastest-growing cellular market right now, with a reported 6.5 million new subscribers per month.

The immediate issues

Vodafone's acquisition of Hutchison's share of Hutch-Essar also comes with certain complications that vodafone has to deal with. The first is the Indian law that prohibits foreign entities from holding more than 74 percent of an Indian telecom company. In terms of the foreign-ownership limits, Vodafone reportedly has deals set up to cover that issue as well. Hutchison Telecom had local partners that, between them, hold a 15-percent interest in Hutch-Essar. Those partners have agreed to retain their holdings, Vodafone says, leaving Vodafone's interest at 52 percent after the deal is completed, just enough for it to have full operational control over the operator plus leaving enough leeway for it to buy the 33-percent Essar stake. Vodafone offered to buy out Essar's stake, paying the same price it paid Hutchison. According to Vodafone, if Essar accepts its buyout offer, it already has local minority partners lined up and willing to buy as much as 26 percent of the company.

The second is its 10-percent stake in rival celco Bharti Airtel, an ownership position that came with a noncompete agreement when it bought that stake for $1.5 billion in 2005. Vodafone said Bharti has agreed buy the 5.6 percent of that stake that represents direct control, with Vodafone keeping a 4.4-percent indirect stake as an investment but having no management or operations position in the carrier. It appears Vodafone comes out smelling like a rose in the deal - Bharti is going to pay it $1.6 billion, so Vodafone both shows a little profit on its original investment and has the 4.4-percent stake almost as a free gift. Vodafone seems to have granted deferred payment terms for the 5.6% stake over the next 18 months. This leaves Voda with an indirect stake of 4.4% worth around US$1.3bn based upon an initial investment of US$0.8bn for the whole of the 10% stake. In addition, Vodafone announced an agreement with Bharti to share network infrastructure in India to cut costs. As part of this transaction, Voda has immediately allayed fear about the capital costs of roll-out of rural GSM in India. It seems that the #3 (Hutch Essar) and #1 (Bharti) will share infrastructure and which will make the investment look at lot more attractive than rolling out infrastructure solo. This potentially gives this partnership a huge advantage over the #1 CDMA operator, Reliance, and the state owned #2, BSNL and MTNL, in the GSM market.

Vodafone's immediate strategy will focus on -

improving the market performance at Hutch Essar: the Vodafone targets a market share (presumably by revenue) of 25% by FY2012

Rolling out the Voda brand and services

Rolling out the network to the 6 circles where there is currently no service.

In the medium to long term, Vodafone will strategise to look at acquiring some of the smaller Indian GSM players to gain market share. Ultimately, the aim must be to be #1 in the market.

Vodafone Group will invest $2 billion in India in the next few years. "I think there will be consolidation in the India market in the near term," Vodafone CEO Mr. Sarin said. "India will be the biggest country for Vodafone in terms of number of subscribers," he said, adding the company will reach a subscriber base of 100 million in the country in the next few years. Sarin didn't specify when he would hit the 100 million target, but said he will achieve faster subscriber growth and a higher subscriber base as a result of roll out in newer circles, or service areas. The companies strategy will be to roll out new services so that the ARPUs increase over next few years (though this remains a very challenging task). The ARPU boost can come from introduction of new services, such as mobile banking in India. On Monday Vodafone announced it would work with Citigroup to develop M-PESA, a mobile phone money transfer application across the world. Sarin pointed out that in many emerging markets - such as India and Africa - mobile phones provide the only way to transact with a bank.

Shapes of things to come - Vodafone & Bharti enter into deal to share backhaul

Vodafone CEO Arun Sarin, in his webcast address on Monday said that infrastructure sharing would enable the UK-based major to save over $1 billion over the next 5 years and also contribute to an addition of 1.5% to its EBITDA margins. In its deal with Bharti, Vodafone has suggested sharing of infrastructure with Bharti. With Bharti and Vodafone having taken the concept of infrastructure sharing to the next level, all eyes are now on the Telecom Regulatory Authority of India. This is because Indian telecom companies are not allowed to share active infrastructure such as optic and feeder fibre cables, radio links, network elements, backhaul, antenna and transmission equipment. At present, Indian telecom companies are permitted to share only passive infrastructure such as towers, repeaters, shelters and generators. But Trai in its upcoming recommendations is likely to suggest that these norms be relaxed.

This concept can translate into big capex and opex savings only if telecom companies are allowed to share both active and passive infrastructure. Trai as well operators feel an extended version of the concept, where radio access networks of operators are shared, can lead to better utilisation of network resources as well as offer increased intra-circle roaming. While passive sharing enables telecom companies to share over 30% in both capex and opex spendings, service providers said that this figure could touch 50% if active infrastructure sharing is allowed.

Active infrastructure sharing will enable operators to provide mobile services to their subscribers wherever their own network signal is not available and help them increase their coverage area and quality of service (QoS) with almost no additional expenditure. Sources also said Trai is examining whether license condition needs to be modified to permit resale of point-to-point bandwidth for limited purpose of backhaul sharing.

Put simply, the savings will not be so significant and Bharti Airtel and Vodafone be able to roll-out joint networks in virgin areas if active infrastructure cannot be shared by operators. Little wonder that Bharti in its communication to Trai on this issue has pointed out that "while, existing license conditions allow passive infrastructure sharing among service providers, however, it has not helped actually translating it into infrastructure sharing to the desirable extent.

THE HUTCH DEAL - WHAT'S THE VODAFONE OFFER

THE COMPANY - Hutch Essar currently has some 23.3 million customers at 31 December 2006, representing a 16.4% national market share. Hutch Essar operates in 16 circles and has licences in an additional six circles. Up until January 2006, Hutch Essar had licences in 13 circles, of which nine have 900 MHz spectrum. In January 2006, Hutch Essar acquired BPL, thereby adding three circles, each operating with 900 MHz spectrum. In October 2006, Hutch Essar acquired Spacetel, adding six further licences, with operations planned to be launched during 2007.
THE DEAL - Vodafone is paying US$11.1 billion for a 67% interest in Hutch Essar, and will assume net debt of approximately US$2.0 billion. The transaction implies an enterprise value of US$18.8 billion for Hutch Essar. HTIL's existing partners, who between them hold a 15% interest in Hutch Essar, have agreed to retain their holdings and become partners with Vodafone. Vodafone's interest will be 52% following completion and Vodafone will exercise full operational control over the business. If Essar decides to accept Vodafone's offer, these local minority partners between them will increase their combined interest in Hutch Essar to 26%.

WHY ? - Constant pressure on Vodafone to enter emerging markets . In the context of a population penetration that is expected to exceed 40% by FY2012, Vodafone is targeting a 20-25% market share in India within the same timeframe. According to Vodafone, India is the fastest growing mobile market in the world, with around 6.5 million new subscribers every month.

BHARTI TO GAIN BY - Vodafone announced that it has signed a memorandum of understanding with Bharti Airtel on infrastructure sharing and that it has granted an option to a Bharti group company to buy its 5.6% direct interest in Bharti.
Whilst Hutch Essar and Bharti will continue to compete independently, Vodafone and Bharti have entered into a MOU relating to a comprehensive range of infrastructure sharing options in India between Hutch Essar and Bharti. Vodafone granted Bharti an option, subject to completion of the Hutch Essar acquisition, to buy its 5.6% listed direct interest in Bharti for US$1.6 billion which compares with the acquisition price of US$0.8 billion.

The Essar Group - currently holds a 33% interest in Hutch Essar and Vodafone will make an offer to buy this stake at the equivalent price per share it has agreed with Hutchison Telecom International.

Vodafone made no comment about whether the network would drop the Hutch branding, and become a Vodafone brand operator in India. The MOU outlines a process for achieving a more extensive level of site sharing and covers both new and existing sites. Around one third of Hutch Essar's current sites are already shared with other Indian mobile operators and Vodafone is planning that around two thirds of total sites will be shared in the longer term.

The plans for future - As part of the operational plan, Vodafone expects to increase capital investment, particularly in the first two to three years, with capex as a percentage of revenues reducing to the low teens by FY2012. The operational plan results in an FY2007-12 EBITDA CAGR percentage around the mid-30s. Cash tax rates of 11-14% for FY2008-12 are expected due to various tax incentives and will trend towards approximately 30-34% in the long term. As a result of this operational plan, the transaction meets Vodafone's stated financial investment criteria, with a ROIC exceeding the local risk adjusted cost of capital in the fifth year and an IRR of around 14%.