Vodafone is investing $1 billion to upgrade its network and retail store units in India. However, the company is mired with other obstacles in India. The company predicts that 3G usage is going to rise in the country, and hence the company needs to upgrade its network, it is not getting enough returns from customers.
Vodafone India’s chief executive officer Marten Pieters said that, “It’s all about data. That’s the most exciting thing we see. If the customer gives me $2 or $3 a month, it’s very difficult for me to build a good network. Where in the rest of the world they get $20, $40, or even $60 or $80 in the US”.
Vodafone, which is the second largest telecom operator in India with 169 million subscribers, is making a strategic decision with the investment. India is among the fastest growing market for the company and will soon overtake UK as its largest source of revenue. Considering that the company recently exited from its stake in US operator Verizon Wireless, to invest in International expansion, investing in faster networks in India will help the company to achieve further growth, as it will drive data demand.
The company expects that subscribers outside cities will soon start consuming data to shop, access entertainment and other services. We are already seeing this pattern. Most E-commerce services are already reporting a competing percentage, if not equal, of its buyers from tier-I & II towns. This is because, most of these towns do not have access to variety of branded items to shop due to constraints over retail store or logistics. However, users in these town can easily buy branded items on E-Commerce sites and most preferably over their mobile Internet connection. Over the time, this percentage is bound to rise and networks will face issues with performance if they do not upgrade their network to accommodate more users. The company also expects to launch 4G service in India by next year, and hopes that some of the users might migrate to its 4G services. Hence the investment in network upgrade is not restricted to its current offering but could be also to enable 4G capability.