Vodafone India to Buy YOU Broadband for $60M – Report

A takeover of YOU Broadband would bolster Vodafone's fixed-line capabilities and could help to support its introduction of 4G services.

Iain Morris, International Editor

March 30, 2016

3 Min Read
Vodafone India to Buy YOU Broadband for $60M – Report

Vodafone India has struck a deal worth around 4 billion Indian rupees ($60.3 million) to acquire broadband provider YOU Broadband, according to a report from India's Economic Times newspaper.

The deal would give Vodafone India control of fiber-optic networks covering some of India's biggest urban markets, and could help to support its rollout of 4G services amid growing competition in India's mobile data market.

YOU Broadband operates 3,000km of optical fiber and has deployed 6,000 miles of last-mile lines in 12 cities, including the major financial center of Mumbai.

News of the deal follows reports in January that Vodafone was in talks with YOU Broadband, currently owned by TRG Capital, about a possible takeover. (See Why Vodafone India Wants YOU Broadband.)

The operator, a subsidiary of UK-based Vodafone Group plc (NYSE: VOD), is now reported to have sought approval from India's Foreign Investment Promotion Board for the YOU Broadband move.

India's telecom market is currently witnessing a spate of consolidation activity. Reliance Communications Ltd. , India's fourth-biggest mobile operator, recently acquired Sistema Shyam TeleServices Ltd. , India's only pure-play CDMA operator, and is also in merger talks with number-five player Aircel Ltd. .

In December, market leader Bharti Airtel Ltd. (Mumbai: BHARTIARTL) acquired a smaller player called Augere Wireless to bolster its portfolio of spectrum licenses.

Concern is growing about the possibility of a price war in India's fast-developing 4G market: New entrant Reliance Jio is believed to be on the verge of launching a commercial 4G offering, while existing telcos are busy extending their own 4G networks. (See RCom May Soon Join 4G Race in India.)

Vodafone Group boss Vittorio Colao told reporters at last month's Mobile World Congress that he expected RJio to be a "formidable competitor" while complaining about levels of competition in the country.

"There are too many players in India and too many are subscale," he said during a press briefing, while refusing to comment on Vodafone's own takeover intentions. "The amount of investment has been insane since 2007."

Want to know more about 4G LTE? Check out our dedicated 4G LTE content channel here on Light Reading.

As noted by Light Reading in January, YOU Broadband's significant presence in Mumbai is likely to be a major attraction for Vodafone. Besides providing triple-play services to consumers, the company offers leased lines in the enterprise sector and now claims to have spent about INR4 billion ($60.3 million) on the rollout of its networks.

Most of India's Internet service providers are thought to have extremely loyal subscribers in the specific areas they serve. "These players often have fiber or copper installed in the last mile and have managed to build a healthy base of customers that exhibit a relatively high degree of stickiness," said Deepak Kumar, the founder analyst of B&M NXT, a market research and advisory firm, during a discussion with Light Reading in January.

Vodafone has grown to become India's second-biggest operator since acquiring the Hutchison Essar business for a fee of about $11 billion back in 2007.

However, the company has had a series of run-ins with Indian authorities and is currently embroiled in a tax dispute relating to the original Hutchison Essar deal.

Last month, authorities warned Vodafone they might seize its assets unless the operator paid a tax bill of $2.1 billion. (See Eurobites: India Turns Up Tax Heat on Vodafone.)

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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About the Author(s)

Iain Morris

International Editor, Light Reading

Iain Morris joined Light Reading as News Editor at the start of 2015 -- and we mean, right at the start. His friends and family were still singing Auld Lang Syne as Iain started sourcing New Year's Eve UK mobile network congestion statistics. Prior to boosting Light Reading's UK-based editorial team numbers (he is based in London, south of the river), Iain was a successful freelance writer and editor who had been covering the telecoms sector for the past 15 years. His work has appeared in publications including The Economist (classy!) and The Observer, besides a variety of trade and business journals. He was previously the lead telecoms analyst for the Economist Intelligence Unit, and before that worked as a features editor at Telecommunications magazine. Iain started out in telecoms as an editor at consulting and market-research company Analysys (now Analysys Mason).

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