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Vodafone mulls India IPO next fiscal year

india Updated: Apr 19, 2011 21:23 IST
Sandeep Singh
Sandeep Singh
Hindustan Times
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Vodafone's Indian unit is mulling an initial public offer (IPO) of shares in the next financial year, as the UK-based giant moves to meet foreign direct investment (FDI) regulations that require the overseas parent's stake limited at 74 % after an impending parting of ways with local partner Essar group.

"We will need to replace 1.35 per cent in order to be compliant to the FDI requirements of up to 74%. One possibility is the listing, which would give even a stronger sense of local roots that we have with this company," Vodafone group chief executive Vittorio Colao told HT.

"(The year) 2012-13 would be a right time to think about it," he added.

The Ruias own 33 % in Vodafone Essar, of which 22 % is held offshore and as part of Vodafone's buying out of its partner in a transaction set to be completed in November, Vodafone, which currently holds a little above 42% must offload at least 1.35%.

Vodafone is currently looking for a partner to replace Essar even as it considers an IPO.

The European operator is also fighting a tax battle concerning capital gains taxation linked to its deal when it entered India by buying out stakes held by HongKong-based Hutchison group. It faces a tax demand of $2.5 billion (about R 11,100 crore)

While Colao termed the dispute as a "cloud" he said he was expecting a fair judgment in the Supreme Court. However, he raised concerns over the unpredictability of India's regulatory environment- in matters such as spectrum allocation and industry consolidation in the form of mergers and acquisitions.

"In data world, you need a lot of spectrum and use it very efficiently. Therefore you need a different kind of industrial approach where you need more spectrum and fewer players," said Colao while adding that the government should allocate spectrum through an auction, and that there should be no discrimination between different technologies.

"There is no point having 12 players out of which six are not doing well and another three are sub-scale. I don't think there should be conditions of market share. Let it happen the way it happens," said Colao. "Its very good to think about competition but not to put rules that have no purpose."

Colao was in India to take stock of Vodafone's business and lay the ground for next year. The company sees itself as a big gainer from mobile number portability and is betting on data services - such as music downloads or internet - to fuel growth.

"I am digital optimist. As of now there is only 5-6 per cent penetration and there is no reason why it should not go to 26-30 per cent like in other emerging markets. We are working to pull down the price," Colao said.