Interactive Investor

Vodafone a winner in Indian auction

27th March 2015 15:41

Lee Wild from interactive investor

Vodafone has spent £2.78 billion in this month’s Indian telecoms spectrum auction. Crucially, it bought spectrum in all six of its 900 megahertz (MHz) circles due for extension in December this year where competition is fierce.

A19 day, and 115 rounds of bidding, the mobile phones giant bought spectrum in 12 circles to significantly expand its 3G capabilities. Vodafone India acquired 5 MHz of 900 MHz band spectrum in Orissa and added a further 30 MHz of spectrum in the 2100 MHz band in six new circles.

An additional 5.6 MHz of 1800 MHz spectrum in three circles complement the 49 MHz of 1800 MHz spectrum bought in the February 2014 auction. All this means Vodafone can expand its 3G service over its own network from 9 circles to 16 circles, representing 88% of Vodafone India's service revenues.

"The results seem much more favourable than feared," said JP Morgan. "With the auction overhang removed, and FX pressures easing, we believe it is time to focus back onto the re-rating potential offered by Vodafone's improving European outlook, and our anticipated return to revenue growth."

Vodafone India had 179 million customers at the end of last year, with 59 million data users, of which 17 million use 3G. Average data usage per customer grew by 40% in 2014.

"Vodafone has emerged from the auction in a stronger competitive position in the Indian market," said the firm. "In addition to buying spectrum in all its key circles that were under auction, Vodafone has acquired new 3G spectrum which will enable the company to increase further the number of Indian customers benefiting from high speed data services."

Vodafone will have to come up with £733 million "shortly", with the other £2 billion payable in 10 equal annual instalments starting in two years. The spectrum won has a 20 year term.