Local ops can offer tips to Sarin

NEW DELHI/MUMBAI: Vodafone could well do with some tips in running telecom operations in a country like India where telecom operators make handsome profits on calls at just 2 cents a minute. The British giant has made many acquisitions in emerging markets, but has never been in a situation where average revenue per user (ARPU) is as low as $7 and continues to shrink every quarter. Vodafone’s expertise lies in raking in profits from value-added services. But that may not work initially in India, where voice, and not data, drives the topline.

“Vodafone, which in the past has closely watched Bharti’s growth and emergence as a dominant player, will now be hard pressed not just to replicate this success, but also better it,” explained an analyst with a leading brokerage house.

Industry experts feel the complexity of the Indian telecom services market, where every circle is an entirely different market, is perhaps the most compelling reason for Vodafone to offer continuity to existing Indian shareholders. Hutch owes its success in India to MD Asim Ghosh and his core team who have built the brand in India. When asked by ET on the challenges faced by Vodafone in India, Mr Ghosh said, “They (Vodafone) have just not picked up shares. This is a company that comes with a bunch of managers who know the business.”

In fact, Vodafone CEO Arun Sarin is aware of this. “We will be bringing in our expertise in terms of a wide range of services while respecting the local fabric,” he told reporters on Thursday. Little wonder that Mr Sarin was all praise for Mr Ghosh and his team. Endorsing complete faith in the current management team at HEL, Mr Sarin told reporters: “Hutch is a formidable company with 23 million subscribers and a highly capable management. My Vote is with Ashim Ghosh to continue heading the Indian operations. I endorse him.”
Vodafone will have to match the likes of Bharti, the current market leader. In the last quarter, Bharti outperformed market expectations with a 123% jump in profit to Rs 1,215 crore from Rs 545 crore for the quarter ending December 2005, even as its revenues rose 62% to Rs 4,913 crore in December 2006, from Rs 3,026 crore.

Vodafone’s previous experience notwithstanding, analysts point out that tackling India requires cost discipline unlike any other market, including Africa and China. The total revenues of Indian GSM operators rose nearly 13% to Rs 6,330 crore for July to September 06 quarter, as compared to Rs 5620.59 crore in the previous quarter.

The growth in revenues comes even as ARPUs fell to new lows to touch Rs 335 per subscriber for the September 2006 quarter as against Rs 347 in the previous quarter. It must also be noted that ARPUs have fallen by Rs 40 per subscriber since September 05, which translates to a decline of 11% in a year.