Vodafone reportedly planning to invest $3 billion in India to combat tariff war with Reliance Jio

With the recent launch of Reliance Jio, Vodafone is now reportedly planning to invest up to Rs. 20,100 crore equity in its India unit as bidding for spectrum is expected to begin in less than a month.

The European telecom giant is also expected to review the timelines of its India unit’s initial public offering, to combat the tariff war fueled by Jio, further added the report. According to people familiar with the matter, overseas market conditions make it favorable to replace debt with equity in India, given the fact that return on equity is higher in the country, that will cut debt servicing costs.

Vodafone Plans to invest $3 billion in India

Vodafone, however, declined to comment on the matter. But the company did mention that it is currently the largest foreign direct investor in India. While analysts suggest that Vodafone India could be the most aggressive bidder in the forthcoming auction as some expect the company to spend as much as $2 billion in next month’s spectrum auctions.

Vodafone India is the country’s second largest Telco, having 4G spectrum in India’s 9 circles out of a total of 22, currently operating in eight. It lags behind market leader Bharti Airtel along with Reliance Jio.

Besides, the likes of Bharti Airtel and Idea Cellular, along with Vodafone India are looking at a tariff war with the entry of Reliance Jio services earlier this month, offering free lifetime outgoing voice calling super cheap data rates. After Mukesh Ambani-led Reliance Jio unveiled Jio’s tariff plans on September 1, Bharti Airtel reportedly lost Rs. 12,000 crore in market capitalization while Idea Cellular’s market value came down by Rs. 2,800 crore. The duo’s combined losses amounted to around Rs 12,000 crore by day end.

Telecom operators in the country, including Vodafone India, are expected to slash rates to keep their subscribers switching to Reliance Jio. Dhananjay Mirchandani, Senior research analyst said –

We expect the depressed telco valuations (which are likely to sustain for a while) will keep the Vodafone India IPO on the backburner. We doubt any listing will happen until well into next year.

He further added that India’s telecom sector is going through a period of extreme uncertainty.

In other related news, India’s telecom regulatory body TRAI had earlier rejected the demand of other mobile operators in the country, who’ve been asking for a fee hike they can charge from Reliance Jio to terminate its calls on their networks.

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