INDIA BUSINESS WORLD - OCTOBER 2005
THE MONTH THAT WAS

VODAFONE MAKES A $1.5B CALL ON BHARTI

Vodafone, world's largest mobile service provider, makes its second bid in India by buying out close to 10% equity in Bharti Tele-Ventures (BTVL) for Rs 6,700 crore ($1.5b). For India, this is the largest single foreign investment yet in any sector. The equity Vodafone has bought includes the entire 5.65% stake of New York-based equity investor Warburg Pincus, besides shares in Bharti Enterprises (the company that runs the Airtel network) which would give the British firm an effective ownership of another 4.4% in BTVL. After this sale to Vodafone, Warburg Pincus has completely exited BTVL.

To give you an idea of the latest entrant in the Great Indian Telecom Battle, the UK-based Vodafone boasts of a market cap of $150-billion. Its subscriber base of 165 million dwarfs the entire Indian market with a total mobile subscriber base of 60 million. It has a presence in 27 countries, including the US, UK, Germany, China, Japan, and Australia.

With this mega deal - Vodafone has picked up shares at a price of Rs 351 each - BTVL is valued at a mind-bending Rs 67,000 crore. Sources say that Warburg Pincus will walk away with Rs 3,700 crore from its equity sale while Bharti Enterprises will get around Rs 3,000 crore. In the new equity structure of the Indian company, Bharti Enterprises will have a controlling stake of 45.9%, SingTel has 15.58% and Vodafone 5.65% stake, with the public holding the rest. Vodafone would also get two seats on the company board. It's a deal that has set tongues wagging and cellphones beeping in Corporate India. How can two global telecom companies happily coexist as equity partners in Bharti? Will SingTel get out or will India's telecom czar quietly exit the venture, leaving the field open to either of the two players? After all, big daddy Vodafone cannot remain content with just a token stake in India...