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Vodafone and DoCoMo bundle into India

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Vodafone is to spend $5bn buying out local partner Essar for control of India's second-largest operator, while DoCoMo is spending $175m to improve 3G coverage in the country.

Vodafone already owns a significant stake in Essar, having paid Hutchinson Telecommunications more than $10bn for a controlling interest back in 2007. But now Vodafone wants to take that interest right up to the limit allowed by regulations on foreign ownership, and will be spending another $5bn to do so.

The deal, which leaves Essar Group entirely out of the picture, will take Vodafone up to 75.4 per cent ownership – just over the 74 per cent permitted under Indian law. But Vodafone reckons it can flog off that 1.4 per cent holding to someone local, and is happy to do so in order to end up with the maximum ownership it is allowed.

While officially called "Vodafone Essar", the network has never used that branding locally, being known as "Vodafone" since changing its name from "Hutch Essar" following the initial investment, so end users shouldn't see any change.

But Vodafone isn't the only company getting excited about India, with Japanese operator NTT DoCoMo today announcing that it's sinking $175m into Tata Teleservices, in which it holds 26 per cent. The money won't extend that ownership, as it is in response to a rights offering by the operator, which wants more cash to extend its 3G coverage. But it is indicative of the confidence the world has in the expansion of the mobile industry in India. ®

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