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Vodafone has finalised a mobile phone infrastructure sharing agreement with rivals in India that should accelerate wireless coverage across the country and provide the participating companies with significant cost savings.
Vodafone, Bharti Airtel, India's largest mobile operator, and Idea, a smaller rival, have agreed to pool network infrastructure in a joint venture that may in the future seek a stock exchange listing.
The three mobile operators will be sharing about 70,000 mobile mast sites that have been put into the joint venture company, although they will retain separate wireless transmission equipment on these towers.
By sharing mobile mast sites, and equipment such as electric generators, the participating companies will reduce their costs by avoiding duplication of capital and operating expenditure,
About another 50,000 towers will be built over the next two to three years to increase mobile coverage.
The infrastructure sharing agreement should help Vodafone to meet financial criteria surrounding its $10.9bn purchase of a controlling stake in Hutchison Essar, India's fourth largest mobile operator, in May.
The most onerous requirement for the world's largest mobile operator by revenue is that the return on its invested capital should exceed the local risk adjusted cost of capital within three to five years. Vodafone is expected to give more details about the deal at an investor day in London on Monday about Vodafone Essar, as Hutchison Essar has been renamed.
Bharti and Vodafone Essar will each have a 42 per cent stake in the joint venture, which is to be called Indus Towers. Idea will have 16 per cent.
"This is the right way to go for deeper coverage and lower costs," said Akhil Gupta, joint managing director of Bharti.
Mr Gupta added that other telecoms companies would be invited to join the venture to further drive down costs.
He said that the joint venture eventually plans to have a listing. However, how the company will be financed is still under discussion.
India is the world's most rapidly growing mobile market, with a total of 217m wireless subscribers at the end of October.
The Indian government has set ambitious targets of having 500m mobile subscribers by 2010, to be achieved partly by extending mobile coverage to rural areas.
Vodafone has already concluded network-sharing deals with rivals in the UK, Italy and Spain. These agreements will help it cut costs in its core European markets, where revenue growth was just 2 per cent in the six months to September 30. Vodafone reported revenue growth of 16 per cent in emerging market