Within hours of a Thursday ruling by India's highest court that all licences awarded in a scandal-tainted 2008 sale be revoked, jeopardising the operations of a handful of smaller carriers, the UK giant ran front-page newspaper ads inviting users of rival networks to sign up for its service without having to change their phone number.
Vodafone, the world's largest carrier by revenue and the number-two in India, is a major beneficiary of a ruling that is likely to accelerate the winnowing of an industry crowded with more than a dozen competitors.
It said in a statement on Friday it intended to fight to protect our lawful investments in the country.
If Telenor, whose joint venture with Unitech
Mahesh Uppal, director at consultants Com First (India), said the verdict is a huge blessing for the biggest operators.
Not only because the reduced competition is de facto consolidation, but also because the spectrum supplies which seemed to be drying up for them, are now plentiful again.
The biggest carriers struggle with service quality on their overstretched networks. The court ordered the telecoms regulator to come up with rules to auction the spectrum in four months.
The speculators will exit, the serious ones will bid, Uppal said.
An exit by smaller carriers would also open a window for a return to telecoms by Mukesh Ambani's Reliance Industries
BUYERS AND SELLERS
Fierce competition, exacerbated by the wave of new licences issued in 2008 by a telecoms minister, Andimuthu Raja, now in jail awaiting trial over the auction, has prevented carriers from turning rampant user growth in India into big profits.
Vodafone, India's largest foreign corporate investor, booked a 2.3 billion pound impairment charge in 2010 on its operation in the country, though its fortunes have been improving. Last month, the Supreme Court ruled it was not liable for $2.2 billion in tax in a long-running dispute with the government.
BNP Paribas analyst Kunal Vora said the market could shrink to seven carriers. We believe most new entrants are unlikely to bid in a future spectrum auction, he wrote in a note.
That's still too many, according to Vodafone's India chief, Marten Pieters, who told Reuters in November India can sustain four or five players. [ID:nL3E7MG2CO]
Both Bharti and Vodafone are expected to be among the buyers of competitors, once rules allow.
Reliance Communications, controlled by billionaire Anil Ambani, has expressed its intention to be a consolidator, but it is burdened by $6.5 billion in debt, profits that have shrunk for nine straight quarters and it is trying to sell its telecom towers.
Idea, controlled by the Aditya Birla conglomerate, is losing seven of its active licences and is expected to re-bid for them, but it is also seen as a beneficiary of the court ruling if it means less competition in its core rural market.
The fourth-biggest by subscribers, Idea has long been seen as either a seller or a buyer. Seventh-ranked Aircel, 74 percent owned by Malaysia's Maxis, is seen as a takeover target.
While industry experts don't expect a foreign newcomer to India through the upcoming auction of spectrum, given still-tough market dynamics, Reliance Industries is a wild card.
The conglomerate, with more than $15 billion in cash, has been diversifying beyond its core energy and refining business.
Morgan Stanley said in a note it expects the company to be interested in bidding for 2G spectrum, along with Bharti, Vodafone, Reliance Communications, Idea, and possibly Uninor.
Mukesh Ambani helped build Reliance Communications, but lost the company to his once-estranged brother Anil when the two split the business empire founded by their late father.
The brothers buried the hatchet in 2010, and speculation has been rampant that Mukesh would invest in Reliance Communications or become a tower tenant for the 4G service.
He's got 4G licences. For him, this would be a complementary service, said Kunal Bajaj, partner and director of Indian operations of London-based consultants Analysys Mason.
Telenor's decision is another swing factor. Its India joint venture has 36 million customers, seven times the population of Norway, but good for only 8th place in India.
Bharti had 176 million users in India at end-December, giving it a fifth of the 894 million-strong market. Only China, with 976 million subscribers, has more, but they are shared among just three operators.
Some smaller operators whose licences were ordered cancelled had already slowed or stopped investing, allowing bigger carriers to begin nudging up tariffs in a country where calls can cost just 1 U.S. cent a minute.
Telenor, however, has continued to invest in India, as has Sistema Shyam Teleservices, controlled by Russia's Sistema
Not all of the players are necessarily going to pack up and go away, Bajaj said. There are some serious players who have been investing in infrastructure.
(Editing by Ian Geoghegan)