India hails Vodafone entry in telecom market

"We are pleased to welcome Vodafone and congratulate them on their Hutch acquisition. The Indian telecom sector is one of the most sought after in the world and the bid is a strong endorsement of the government policy to promote the telecom sector," said Bharti Airtel’s Sunil Mittal. Airtel is the largest private mobile services operator in India having about 32 million mobile phone subscribers.

"Bharti and Vodafone have enjoyed a very fruitful partnership and both companies will work with the industry towards connecting millions of people across India," he added.

Vodafone, which has a 10 percent stake in Bharti Airtel, has sold back 5.6 percent to the promoter Sunil Mittal's group for $ 1.6 billion.

"Vodafone has sold its 5.6 percent direct stake in Bharti Airtel to the group," Mittal said, elaborating that the deal was on a deferred payment basis.

Vodafone will, however, continue to hold an indirect 4.4 percent stake in the company, as a financial investor and will neither have any representation on Bharti Airtel's board nor any management rights.

As per the telecom norms, an operator cannot hold more than 10 percent stake in two service providers. This is why Vodafone is shedding its stake in Bharti.

Bharti Airtel and Vodafone have also entered into a comprehensive memorandum of understanding (MoU) on a range of significant areas, including infrastructure sharing, roaming and long distance services. Bharti Airtel will be the preferred vendor of Vodafone for NLD, ILD and leased line services. Vodafone will also give 50 percent of its in-bound international roaming traffic to Bharti Airtel for three years.

The two companies will also work on a comprehensive range of significant infrastructure sharing options, including around 70,000 towers in India, enabling rapid network expansion to connect sub urban and rural areas across the country and reducing costs.

However, Bharti is in no mood to relinquish its dominant position in the telecom market.