Vodafone sees China growth

Vodafone sees China growth

Vodafone is seeking to increase its presence in China through a government-led restructuring of the country’s telecommunications industry.

Arun Sarin, Vodafone’s chief executive, told the Financial Times that the UK mobile phone group’s $13bn stake in China Mobile, China’s leading wireless operator, was a “kitty” that could be used to take advantage of opportunities.

The Chinese government is planning a restructuring of the country’s telecoms sector that may reduce China Mobile’s dominance of the world’s largest mobile market.

The most widely discussed possibility would involve the break-up of China Unicom, China Mobile’s smaller rival, and the division of its mobile assets between China Telecom and China Netcom, the country’s two fixed-line operators.

Industry analysts said transferring Unicom’s wireless assets to China Telecom and China Netcom could boost competition and reduce duplication of investment when China adopts third-generation mobile technology.

Such changes might also give Vodafone the chance to swap its 3 per cent stake in China Mobile for a bigger minority shareholding in another Chinese mobile company, although Mr Sarin said it was too early to tell what form the industry revamp could take.

He highlighted the growth opportunities in China, given only 35 per cent of the population has a mobile phone.

Mr Sarin said restructuring might happen next year, adding: “From our shareholders’ point of view, China is 35 per cent penetrated, we have got a long way to go. Would we like to participate in a bigger way? Of course we would like to participate in a bigger way.”

He also highlighted how Vodafone’s 3 per cent stake in China Mobile, bought for $3bn, was now worth $13bn.

“We have $13bn in China. That is a nice kitty [or] endowment to either stay where we are, or take wherever we want it,” he said.

Asked if he could see Vodafone selling out of China Mobile and taking a large minority stake in one of the fixed-line companies, such as China Netcom – if it gains a mobile licence – Mr Sarin replied: “Frankly, whatever the Chinese government wants us to do, so long as it is responsible and right, we will do.”

He stressed Vodafone did not expect to obtain a majority stake in a Chinese wireless business, because of government control.

Meanwhile, Mr Sarin also said Vodafone was discussing a “more expanded partnership” in India for network sharing and would look at expanding in Africa if it secured control of Vodacom, South Africa’s largest mobile operator.

When Vodafone won the fiercely contested auction for a controlling stake in Hutchison Essar, India’s fourth largest mobile operator, in February, it announced plans for a network sharing deal with Bharti Airtel, the country’s leading wireless business.

However, Vodafone is now considering network sharing with several Indian mobile operators, which could generate greater savings in capital and operating expenditure than previously thought.

Mr Sarin also said if Vodafone successfully concluded negotiations to secure control of Vodacom, South Africa’s largest mobile operator, it would look to expand further on the continent.