Vodafone is already the world's largest wireless service provider by market cap, but most of its current operations are concentrated in the low-growth, mature markets of Europe and the U.S. Vodafone's management saw the need for the company to expand beyond its usual geographic regions and has been making huge strides toward establishing a Vodafone presence in emerging markets. In May of 2007, Vodafone acquired a 67% stake of Hutchison Essar, the fourth-largest wireless company in India, for around $10.7 billion. This steep price tag was worth it, though. With a wireless penetration rate in the neighborhood of 13%, India is one of the fastest-growing mobile phone markets in the world. The Hutchison deal came a little over a year after Vodafone's acquisition of Turkish wireless company Telsim Mobil Telekomunikasyon Hizmetleri AS for $4.55 billion. The company's operations in Turkey have exceeded expectations, and its Indian business could very well do the same. Already, revenue from emerging markets has grown substantially, with a 37% jump in EBITDA from emerging markets from FY2006 to FY2007. As growth slows in Europe and the U.S., emerging markets will account for a steadily larger portion of Vodafone's sales and profits; its savvy acquisitions in key markets put Vodafone in a good position to take advantage of this shift.
Because the firm is not an incumbent telephone operator, it has no legacy problems like underfunded pension and healthcare benefit programs, civil-servant employees, or regulations mandating universal telephone service.