Vodafone Could Be Forced To Sell Its Stake in India's Bharti Airtel

Vodafone could be forced to sell its stake in India's leading mobile carrier Bharti Airtel after India revised telecom licensing rules, prohibiting cross-holdings in rival telecoms companies.

The world's second-largest mobile operator, Vodafone has a 4.4% stake in Bharti, worth about $1bn.

According to new rules published by the telecoms ministry, a mobile carrier cannot own a direct or indirect equity stake in a rival firm operating in the same service area.

Vodafone's Indian subsidiary and Bharti compete in all of India's 22 service areas, referred to as telecom circles.

Under the new rules, a stakeholder with a holding of 10% or more in one mobile operator cannot own a stake in another operator. This, however, does not apply to the government, banks and financial institutions.

Companies must abide by the rules within a year of being granted a new licence, the ministry said. Applications for telecom licences might take months to process.

Pursued by Reuters, Bharti declined to comment and Vodafone did not reply to an email seeking comment.

Vodafone's Indian unit is the second largest mobile carrier in that country with 22% market share by revenue. It trails market leader Bharti Airtel, which commands a 30% market share.

Bharti's stock price closed 0.29% higher at 344.70 rupees (£3.69, €4.24) on Friday in Mumbai, valuing the company at 1.38 trillion rupees (£14.7bn, €17bn).

Recently, the Vodafone Group announced a voluntary public takeover offer for Kabel Deutschland, further to an announcement of its agreed takeover bid for the German cable firm.

Earlier, the British firm revealed that first quarter income and sales were hit by regulation, rising competition and the ongoing recession across Europe.

Service revenue in northern and central Europe, where it derives most of its income, declined 3% in the three months to 30 June. Revenue in India, however, shot up 13.8% in the first quarter, owing to a stable price environment, after years of a price war, and higher demand for its internet services.

Vodafone has said it is on track to meet its full-year targets.