Vodafone May Consider IPO of Indian Joint Venture After 2011, Colao Says

Vodafone Group Plc (VOD) Chief Executive Officer Vittorio Colao said the world’s biggest mobile-phone operator may consider an initial public offering of its Indian venture, similar to that of the South African unit.

The listing would only be considered after 2011 and after disputes with partner Essar Group and the Indian tax authorities are resolved, Colao said in an interview with Bloomberg UTV in Mumbai yesterday. The listing also depends on local demand for data offerings, he said.

After these matters are settled, “we should consider at some point whether a listing of the company is an option,” he said. “If there’s a good story from a data perspective, and from a regulatory perspective, I’d be likely to look at it.”

Vodafone, based in Newbury, England, last month said it will buy an additional 33 percent stake in Vodafone Essar Ltd. for $5 billion from Essar, raising its stake in India’s third- largest mobile-phone operator to 75 percent.

“I would think markets would take a listing positively, Vodafone is a very respected player,” said Apurva Shah, head of research at Prabhudas Lilladher Pvt. in Mumbai. “In India, the outlook on the mobile companies is turning somewhat positive,” he said. “Institutional interest is certainly there for mobile companies at this point.”

Local Rules

Listing shares may help Vodafone to comply with local rules. The deal with Essar will increase Vodafone’s direct equity stake in the venture to 75 percent, while India doesn’t allow foreign companies to own more than 74 percent in a local mobile-phone operator.

“One of the possibilities for us is to do what we have done in South Africa,” Colao said.

Vodafone listed its South African unit in 2009. The business, called Vodacom Group Ltd., is the largest provider of wireless services in South Africa.

Vodacom “maintains its independence, but we have local individual shareholders, and all the benefits of belonging to the Vodafone Group,” the CEO said. “South Africa is one of the countries where data is growing the most. So, there are some similarities here.”

Another option in India is to turn to smaller local partners, Colao said. “The short-term option is to use more our Indian partners that we have here, or to find other Indian partners that want to be part of the adventure.”

Indian ‘Jewel’

The Indian wireless market is forecast by Stamford, Connecticut-based Gartner Inc. to exceed 993 million users by the end of 2014. India was one of the “jewels” in the three months through December, Colao said in February.

Vodafone bought a 67 percent stake in Hutchison Essar for $10.7 billion in 2007. Vodafone’s outlook for India soured a year after its entry, when six new national licenses were awarded.

Vodafone is challenging a tax bill for the acquisition of Hutchison Whampoa Ltd. (13)’s local unit, the country’s largest cross-border deal. India is seeking 112 billion rupees ($2.5 billion) on Vodafone’s purchase and the company was ordered to set aside 25 billion rupees as a deposit.

“We trust the objectivity and the fairness of the supreme court,” Colao said. “We are buyers, not sellers of an asset, and no buyer in the world can make a capital gain for an asset that is bought,” he said.

“If the Indian tax authorities want to go after a certain transaction, please at least go get the guys who made the money, not the guys who are investing in the country,” Colao said.

To contact the reporter on this story: Ketaki Gokhale in Mumbai at kgokhale@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net

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