Vodafone India, a subsidiary of British mobile phone giant Vodafone Group Plc (VOD - Analyst Report), seeks to extend its license for operation in three of its service areas — Delhi, Mumbai and Kolkata. The company’s license period in these Indian cities would end in 2014 (the period began in 1994). The company now expects to expedite the issuance based on the existing terms and conditions.
Approval of the new licensing agreement, which can provide an extension of up to 10 years is subject to the approval of India’s Department of Telecommunications. By March 2013, Department of Telecommunications is expected to issue new guidelines for telecom licenses.
Based in Newbury, United Kingdom, Vodafone Group is the world’s largest revenue generating wireless communications operator and the second largest carrier after China Mobile Limited (CHL - Snapshot Report) based on subscription.
The company, which enjoys strong presence in Europe, the Middle East, Africa, Asia Pacific and the United States, is expanding its presence in emerging markets due to the strong adoption of data services and migration to smartphones. India being one of such markets represents an important revenue driver for the company. This remains evident by the company’s recent financial results for the first half of fiscal 2013.
Service revenues at Vodafone India increased 13.5% year over year buoyed by customer base and strong growth in incoming and outgoing mobile voice minutes. Data revenue growth was 12.4% year over year driven by rising demand for mobile data services. As of September 30, 2012, the company had 153 million mobile subscribers in India, representing the largest mobile customer base under its coverage across the globe.
Given the growth trajectory, the company is accelerating its investments in building infrastructure in India. In recently published reports, the company stated that it invested approximately INR 10 billion in 2012 in major cities like Delhi, Mumbai and Kolkata. We believe these investments will remain accretive to Vodafone’s growth prospects and enhance its subscriber growth in these markets.
We believe the growth in markets like India can offset the negatives of challenging market conditions that the company is experiencing in Southern Europe, particularly in Italy and Spain.
For the short-term (1-3 months), Vodafone has a Zacks #2 Rank, implying a Buy rating. For the long-term, we have a Neutral recommendation on the stock.