Vodafone’s pursuit of India’s Hutchison Essar is being seen by some as a sign of renewed confidence at the world’s leading mobile phone operator after a turbulent 2006.
The company has confirmed it is considering making a bid for a controlling stake in Hutchison Essar, which is the fourth-biggest operator in India – the world’s fastest-growing mobile phone market. Such a move would have been virtually impossible a year ago, with the Vodafone board at war and chief executive Arun Sarin battling to keep his job.
Sarin is facing competition for Hutchison Essar, which is 67% owned by Hutchison Telecom International and 33% by Essar, a conglomerate with shipping, steel and oil interests. Essar is looking to buy the two-thirds of the business it does not already own, and India’s second biggest operator Reliance Communications is also thought to be interested. But the fact that Vodafone is in the running at all is proof that the brand is back on track, claim some industry observers.
But Strategy Analytics senior analyst Sara Harris thinks it is simply opportunism on Vodafone’s part. An acquisition would give Vodafone control of a key player in a market where just 10% of people have a phone. In October last year, 6.7 million new subscribers brought India’s total to 136 million “I can see the value of getting into this particular market but I think it’s more about that than Arun Sarin finding his feet again,” adds Harris. “India is huge and he’d be stupid not to try to get into it, but I’m not convinced this is the start of a great big Vodafone rejuvenation.” The acquisition would be consistent with the company’s strategy of looking to emerging markets for growth to boost slowing revenues in Europe. A Vodafone spokesman believes it is the consistent execution of that strategy that has seen the company emerge from its bad patch.
“It’s fair to say that last year was pretty grotty,” he says.
Vodafone, which is launching a broadband service in the UK next week, moved its £47m UK advertising business from JWT into its global agency Bartle Bogle Hegarty (BBH) last month. BBH London managing director Ben Fennell says Vodafone is in a strong position because of the clarity of its thinking.
“There is a spirit of confidence and optimism around the business,” he says. “Nick Read [chief executive of the UK business] seems to have galvanised an awful lot of support. People are inspired by him. The Carphone Warehouse decision [Vodafone signed an exclusive deal with rival Phones4U to sell its contract handsets] has been seen as a bold, decisive piece of leadership.”
Breath of fresh air
The tide appears to be turning at Vodafone and a host of personnel changes – from Sir John Bond coming in as chairman of the group to Matt Coombe joining from Honda as UK head of brand – have breathed new life into the brand.
Harris adds: “I think Vodafone is going to bounce back and have a better year than last year. Mind you, it couldn’t get much worse.”