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India may become Vodafone's largest market in one year

On the back of continuing surge in the number of mobile users, India is likely to soon surpass Germany and the US as Vodafone's biggest market in terms of subscribers, although the company might fail short of its target of becoming number one mobile player in the country.

According to Macquarie Research, Vodafone's subscriber base in India is expected to rise to about 38 million by the end of 2007, from Hutch-Essar's current base of 25.3 million.

Vodafone had reached a deal last month to acquire controlling stake in Hutch-Essar, which it plans to rename as Vodafone Essar, for about $11.1 billion in cash, while it has also announced an investment of $2 billion in the next couple of years.

Currently, India is the third largest market after Germany (30.6 million) and the US (26.2 million subscribers) for Vodafone, the world's second largest mobile operator in terms of subscribers and largest in terms of revenue.

Vodafone's India-born CEO Arun Sarin said during his recent visit here he aims to make the company India's largest mobile operator with a market share of 25 per cent by 2010.

However, Macquarie Research said in a report on Indian telecom sector that Vodafone's aim to gain 25 per cent market share by 2012 was "a bit unrealistic without help from M&A" activities.

Hutch-Essar's current wireless market share in the country is 15.9 per cent, which could increase to over 16.5 per cent with the integration of Essar's BPL Mumbai circle operations, Macquarie said.

The British telecom major's growth in India operations would depend on expanding its market share, cost reduction through measures like infrastructure sharing and expansion of distribution and network coverage among other factors.