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Tuesday, June 20, 2006

Onion Bharti

Vodafone’s Asian strategy is a complete mess and I’m not talking about the huge strategic error in exiting Japan. There is nowhere better to highlight this mess than Vodafone’s associate company, Bharti in India. Vodafone recently purchased 10% of the company, directly and indirectly, and allegedly exerts enough power to proportionally consolidate the results. Yeah right…

The local “promoter”, Sunil Mittal, was in Singapore yesterday spouting his usual inflammatory comments. My personal opinion is that he deliberates goes out to wind-up his overseas partners, Vodafone and Singtel, at every opportunity. His current view is that the time is right for Bharti to expand overseas and seeing that Indian Investment is not currently permitted in Pakistan, the main markets he is looking at are in Bangladesh and Sri Lanka. Bearing in mind that Vodafone already has just signed partner network in Sri Lanka and Singtel owns a subsidiary in Bangladesh, you can sense how much the hair on the back of Arun Sarin’s neck bristles every time his fellow countryman speaks.

This is on top of the Bharti investment’s in Telecom Seychelles and mre recently a start-up close to home in Jersey. Sarin must be wondering what is going on and whether the partnership will ultimately join TDC in the courts. At least he never invested in TDC the company, although I suspect there are a few Private Equity chaps who would be prepared to sell out to Vodafone for the right price.

On a more positive note, Bharti seems to be marking the right moves in the giant under penetrated India market. They are accelerating capital investment (increasing from US$1.5bn pa to US$2bn) and taking more than their fair share of gross adds (increasing market share from 21.8% now to 25% in 2010). The lessons from nearly every mobile market are that it is ultra-important to grab market share when demand is exploding as it is extremely to pick up share later.

Sarin should exert his power and tell Sunil Mittal to calm down and focus upon the Indian Market, even narrowing it down further to stop the investments in agriculture and supermarkets. That is unless, of course, Sunil can wind-up the Singaporeans so much, that they want to exit with naturally Vodafone buying the stake off them ;-)

Will it all end in tears?