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Vodafone invests US$7.2bn in India unit as Jio rolls out free calls offer

CUTTHROAT COMPETITION:Vodafone India plans to use the money to expand its network and participate in a government auction for spectrum for 4G services

Bloomberg

A retail shop owner speaks on his mobile phone outside his closed shop painted with an advertisement for Vodafone at a market in the southern Indian city of Chennai on Dec. 30, 2013.

Photo: Reuters

Vodafone Group PLC has invested 477 billion rupees (US$7.2 billion) in its India unit, bolstering the local carrier’s finances as it prepares to go public amid rising competition and a pending airwaves auction.

Vodafone India, which received the infusion during the first fiscal half, plans to use the funds to expand its network and participate in the auction for spectrum that can be used for 4G services, the carrier said in a statement.

About US$3 billion was a conversion of debt into equity, the Economic Times reported on Wednesday.

A Vodafone spokesman had no immediate comment on the structure of the investment.

The investment gives Vodafone India more firepower in the crowded market, weeks after billionaire Mukesh Ambani, India’s richest man, began operating his mobile-phone carrier Jio by offering free phone calls. That has put pressure on existing operators in a market that already offers some of the world’s lowest tariffs.

India is also planning its biggest sale of spectrum, seeking to raise 5.6 trillion rupees by selling airwaves, as carriers gear up to expand high-speed mobile Internet services.

“The investment by Vodafone in the Indian unit is a positive move as it goes to show that they want to grow in the market, as well as demonstrates that the incumbents need to upgrade their technology and networks with the entry of Jio,” said Gaurang Shah, vice president at Geojit BNP Paribas Financial Services Ltd in Mumbai. “This will also give confidence to potential investors and help spur interest in the IPO [initial public offering].”

Vodafone India has not said when it will go public. The company plans to raise as much as US$3 billion, people familiar with the matter said in April.

Vodafone, India’s second-largest wireless operator, may be the biggest spender at the auction by offering as much as 163 billion rupees for airwaves, according to Sanford C. Bernstein estimates.

The sale will help reduce buffering on videos and speed up downloads for India’s 1 billion-plus users who make up the world’s second-largest smartphone market. The government plans to sell airwaves in every band.

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