Jan. 10 (Bloomberg) -- Vodafone Group Plc expects to triple the share of data revenue at its Indian unit as more customers use smartphones to access the Internet and download music in the world’s second-largest wireless market.
The contribution of data to the unit’s total revenue will rise to 10 percent in two years from about 3 percent at the end of September, Samaresh Parida, Mumbai-based director of strategy at Vodafone India Ltd., said in a Jan. 6 interview. Services like banking and applications to help farmers increase productivity, will help drive data use, he said.
Mobile-phone operators including Vodafone and Bharti Airtel Ltd. are trying to boost phone bills, which averaged less than $2 last year, by pushing high-end services such as streaming video. Vodafone spent 116 billion rupees ($2.2 billion) in 2010 buying licenses for third-generation services after the entry of Norway’s Telenor ASA and Japan’s NTT DoCoMo Inc. pushed voice- call rates to as low as a penny a minute.
“Right now the growth of data is pretty phenomenal, but it’s from a very small base so we’ll be pushing the throttle on growing the business in data as fast as possible,” Parida said.
Vodafone may also consider buying competitors to increase its spectrum holding after the government eases merger and acquisition rules, he said.
The stock yesterday dropped 1.3 percent to 177.10 pence in London trading.
First-half data revenue in India climbed 66 percent helping boost segment revenue from the South Asian nation to 2.12 billion pounds from 1.87 billion pounds a year earlier, Vodafone reported in November.
Persuading customers in India to use costly data services will take time, according to Sanjay Kapoor, chief executive officer for India and South Asia at Bharti Airtel, India’s biggest mobile-phone company. Average revenue per global system for mobile communications, or GSM, user in India declined to 100 rupees ($1.90) at the end of March from 131 rupees a year earlier, according to the Telecom Regulatory Authority of India.
Bharti Airtel has introduced plans with small amounts of free data to reduce 3G “bill shock,” Kapoor said Nov. 4. The plan, which provides 1.25 gigabytes of free data for a month, costs 675 rupees. Still, only a quarter of the company’s 7 million 3G customers are active users. Bharti had a total of 174 million Indian subscribers at the end of October.
Vodafone, which has an average of 5 to 6 megahertz of spectrum in most zones in India, compared with the 22 megahertz it holds on average in other countries, needs additional airwaves to boost its data services, according to Parida.
“This limited spectrum is a curse to the industry,” he said. The government needs to provide a “spectrum roadmap” on when new airwaves will be auctioned, Parida said.
India’s latest five-year telecommunications plan says the freeing up of spectrum for use by mobile-phone companies is a “high priority” and it aims to do so by 2015. The government plans to release more 4G spectrum, though an exact timeline has not been set.
“If I don’t get 4G spectrum, what will I do? It’s a scary thought,” Parida said. “But it could be real in the environment where it’s not managed properly.”
India held auctions of third-generation and fourth- generation wireless spectrum in 2010, raising a combined $20 billion for the government. Vodafone bought 3G licenses in nine of India’s 22 telecommunications zones.
The world’s biggest mobile operator dropped out of India’s 4G auction, held in May 2010, citing “beyond rational” bids.
India’s current policy also includes caps on the amount of spectrum a merged company can hold, thereby limiting the scope for operators to use acquisitions to gain airwaves. A new policy, which the government last month delayed by at least six months, could ease those rules.
“To me, customers are not the attraction,” Parida said. “It would be spectrum. But if the spectrum has to be given away, that is no fun.”
India restricts the amount of spectrum a company holds to 15 megahertz for a so-called circle in some regions and 12.4 megahertz in other parts, according to the Department of Telecommunications.
Vodafone last year agreed to pay $5.46 billion to buy out its partner Essar Group’s stake in the local venture, aiming to gain more control in a market forecast by Gartner to grow 28 percent to 872 million active subscribers by 2015. The carrier has 146 million customers and a 17 percent market share, making it India’s third-biggest behind Bharti and Reliance Communications Ltd.
Vodafone is also waiting for a judgment from India’s Supreme Court on its appeal of a 112.2 billion tax claim relating to its 2007 purchase of Hutchison Whampoa Ltd.’s Indian wireless operations.
Vodafone said in a statement yesterday it plans to expand partner agreements with other Asian and South American operators this year. These deals allow Vodafone to expand roaming services, and in some cases, its brand, without taking equity stakes in other companies.
--With assistance from Jonathan Browning in London. Editors: Suresh Seshadri, Frank Longid
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