Vodafone Said Preparing to Appoint India IPO Banks in Early 2016

  • Company waiting to assess impact of Reliance Jio service
  • Share sale may value Indian business at about $20 billion

Vodafone Group Plc plans to ask banks to pitch for a role advising on the initial public offering of its Indian business as early as the first quarter of 2016, according to people with knowledge of the matter.

The schedule would give Vodafone time to assess the impact from billionaire Mukesh Ambani’s upstart wireless operator Reliance Jio Infocomm Ltd. -- which is slated to start commercial operations around December -- before it sells shares later in 2016, the people said. Vodafone may sell at least 10 percent of the India unit through the offering, which could value the business with more than 180 million customers at about $20 billion, said the people, asking not to be identified as the information is private.

Vodafone also wants to wait for the results of a spectrum auction by the Indian government, expected early next year, two of the people said. An IPO would provide Vodafone with cash while allowing investors to bet specifically on India, where wireless growth is outpacing that of more mature markets such as the U.K. 

If Vodafone raises the local-currency equivalent of $2 billion, the sale could surpass the 2008 listing of Reliance Power Ltd. as India’s biggest private-sector IPO, data compiled by Bloomberg show. Vodafone hired investment bank Rothschild to compile a report about the benefits of an IPO, which had been due in the fall.

Vodafone shares pared earlier losses of as much as 1 percent, closing down 0.6 percent at 215.35 pence in London on Tuesday. The company has a market value of 57.2 billion pounds ($88 billion).

Unpredictable Environment

The carrier hasn’t made a final decision on the offering plans, and details such as valuation are subject to change, the people said.

“We have started preparations for a potential IPO but no decision has been
made,” Vodafone spokesman Ben Padovan said in an e-mail. “Whether we go ahead or not will depend on a number of factors including market and industry dynamics in India."

After talks with John Malone’s Liberty Global Plc to exchange assets fell apart last month, Vodafone is looking for ways to boost its stock and respond to an industry shift as more customers want bundles of wireless, TV, broadband and home phone services.

India accounted for about 10 percent of Vodafone’s revenue in the year through March, according to data compiled by Bloomberg, and customers in the country made up more than half of Vodafone’s global voice minutes used and 40 percent of its mobile subscribers. India also has some of the lowest customer bills, with monthly revenue averaging at less than 2 pounds per user.

Chief Executive Officer Vittorio Colao has talked about an IPO of Vodafone’s Indian business for years, putting it off as it struggled with tax and regulatory spats that made the environment too unpredictable for a share sale. The Newbury, England-based company came close in 2012 until the government attempted to increase prices for spectrum licenses, making an IPO “impossible,” according to Vodafone’s India head at the time.

Vodafone has also come closer to resolving its tax disputes. Indian authorities said in January they won’t fight a Bombay High Court decision in Vodafone’s favor over a challenge that would have increased the company’s taxable income. The company also said last year it started international arbitration to resolve a separate quarrel, valued at 142 billion rupees ($2.2 billion) as of 2013, over its 2007 acquisition of CK Hutchison Holdings Ltd.’s local business.

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