Confronted with cut-throat competition, falling rates and margins on one side and high investments, shortage of spectrum and scams on the other, Indian telcos are feeling the heat. Marten Pieters, CEO of Vodafone Essar Ltd, the country’s second-largest mobile company, talks about the key issues concerning the sector and what the mobile world will discuss, just a few hours before the GSMA conference. Edited excerpts:
Indian telecom seems to have taken a beating. Are there serious concerns?
Yes, the revenues of the industry peaked in January-February 2009 and fell soon after. Two years have elapsed but the situation hadn’t improved. Yet, subscribers have doubled from 300 million to over 650 million. So, while you had flat revenue growth, we have doubled the consumer base.
Why were the revenues flat?
The main problem is the industry structure. While there’s a huge market, there are too many players, and all of them can’t be sustained. Every operator has some fixed costs which he has to spend to ensure that services are available across the country. The marketing costs of all operators would be more or less similar. This is the minimum threshold which one has to invest. In UK, there were five players. When there are too many players, one will drop tariffs and everyone has to follow. I don’t think there can be more than four to five players.
Is spectrum a serious problem?
Of course, yes. That is why the quality of service has fallen. In London central district, 1MHz of spectrum is used to serve 45,000 customers. In Delhi, it is used to serve 350,000 customers or eight times. This is our basic raw material. So, we build more towers than what is globally required to reuse the spectrum.
Now that 3G spectrum has been allocated, will the problem resolve?
Look at the way the auction was done. You have more than 10 players, but only four blocks were available. If six blocks were available, the pricing would have been different.
So, will Vodafone relook at its investments in India?
We are committed to India and have already invested a lot. We pay 35 per cent of our revenues to the government. However, there is no doubt that the overall capital inflows in this sector are under pressure. Investors are not committing to put in equity in this sector. Even banks are not ready to commit money. The government has to make up their mind whether they want to see the industry for maximisation of revenue or for this growth.
What are the key areas that the global telco industry is looking at in the next two to three years? What are the key concerns to be discussed in GSMA Barcelona?
One key area is how to bring about the democratisation of data traffic. In Europe today, broadband wireless has not reached rural markets and this will need huge investments. That is one clear focus area.