Difficult to cope in India with low spectrum, high prices: Vodafone

12 Nov 2014


Global disillusionment with the tall-promising Narendra Modi government seems to be already setting in, as Vodafone India, the second largest mobile operator in the country, said on Tuesday that conditions for doing business in India have not improved much in the last few months.

The day is not very far when telecom companies will have to shell out more for spectrum acquisition than what they would need to spend for developing the infrastructure if the government continues with its current policies, Vodafone India managing director and chief executive officer Marten Pieters said in New Delhi.

The chief of the British telecom company's Indian arm said the recent decisions by telecom authorities have disappointed the sector. ''It is wrong to hold the auction without enough spectrum on the block. Unless the government frees up additional spectrum for commercial use, it may call for disaster, and some of the existing operators may have to close shop.

''Most of the investments (in the sector) happened in the last five years and these are long-term investments,'' Pieters said. The government should make more spectrum available for commercial use and offer it at a reasonable cost. ''Without enough spectrum, the government's agenda of building 'Digital India' will fail,'' said the Vodafone chief.

''The government should take it seriously. Globally, we have seen governments have come out with alternative solutions, sometimes by splitting the auction process. In any case, the quantum of spectrum that operators get in India is too low as compared with that of the developed countries, even as the number of subscribers is much higher here,'' said Pieters.

Vodafone in February this year bought some back-up spectrum in the 1800 MHz band in a few circles. According to Pieters, the company does not have enough quality spectrum. ''In the previous auction, there was enough spectrum in the 1800 MHz band to fall back upon, in case an operator fails to retain its holding in the 900 MHz band. This time even that is not there,'' he said.

This will make prices shoot through the roof. ''Trimming down operations might not be feasible either well. If prices are too high, we may look at options like trimming down 3G services to just a few circles,'' said Pieters.

Vodafone India, which will lose licences in a few circles in 2015-16, said it will not have any back-up spectrum in two circles – Rajasthan and Maharashtra-Goa, both high value circles. So no matter what the price, Vodafone will have to win back its current holding of airwaves in the 900 MHz band in these two circles just to continue operations.

''We'll still go ahead and bid for spectrum irrespective of the price and scenario,'' said Pieters. On the other hand, Vodafone does not have ''good quality'' spectrum to fall back upon in two more circles – Gujarat and Uttar Pradesh (East). So the company will also try to win back some 900 MHz spectrum in these two circles. ''It all depends on the appetite to stay in business and financial strength of an operator that would determine the game,'' said Pieters, adding that the company has already invested a lot in India and the country is ''very important'' for Vodafone Group.

On possible mergers and acquisitions in India, Vodafone India chief financial officer Thomas Reisten said there are a couple of operators who have been struggling. ''As a company we always look for opportunities in a particular geography but taking a decision depends on a lot of things. There is nothing on board right now. We are open if it makes financial viability,'' he said.

Vodafone India has moved the Delhi High Court alleging the Centre is indulging in "arm-twisting" and "coercive" tactics by refusing to sign its unified licence (UL) till it unconditionally accepts the "restrictive" clauses in the licence.

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