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FIPB approves Vodafone’s proposal to acquire 100% stake in YOU Broadband

Vodafone’s proposal to acquire 100% stake in TRG Capital owned You Broadband India has been approved by the FIPB last week “by way of transfer of shares from resident shareholders and non-resident shareholder”. The stake is worth Rs 55.09 crore. Vodafone had entered into talks to acquire YOU Broadband for a reported value of around Rs 350-400 crore in March last year; the deal was closed in April last year.

As of December 2016, YOU Broadband had 0.6 million subscribers on its network and is also one of the top 5 broadband providers in the country in terms of subscribers.  It also claims to have around 3,000 km of optic fiber cables, and 6,000 km of last mile cables to homes across 12 cities including Mumbai, Bangalore, Gurgaon, and Chennai. It also claims to have collaborated with companies like Motorola, Avvaya, Commscope, Cisco to provide their services across the 12 cities they operate in.

Vodafone might look into launching fiber soon

On the other hand, Vodafone is a telecom operator focused on cellular services. It reported 65 million data subscribers during December 2016. The YOU Broadband acquisition will work in favour of Vodafone in two different ways:

Entry into Wired broadband space: With the acquisition of YOU Broadband, Vodafone has formally entered the wired broadband space. After Reliance Jio launch, which is also planning on a fiber service, more telcos have followed by increasingly investing in fiber to take on the new entrant.  Idea claims to have a fiber coverage reaching an overall presence of 133,800 kms; the company is using this as a backbone for its cellular services. Airtel also launched its fiber-based broadband in October last year.

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Competitive advantage: Vodafone now has access to spectrum owned by YOU Broadband. While it’s not clear how the company plans to utilise the newly acquires bandwidth, it is also facing competition from Jio, which has been betting on free data/voice for amassing subscribers. Vodafone also announced a merger deal with Idea, making the merged unit, the biggest telco in the country in terms of asset and spectrum holding to take on Jio. Although Vodafone hasn’t announced FTTH plans under its own brand yet, the company might soon look into the possibility to compete with Jio’s fiber services, once it launches.

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