Vodafone India readies for IPO
NEW DELHI: The Vodafone Group has started “preparatory work” for an initial public offering of its Indian unit, although no dates have been set yet, the British telecom company’s CEO said, expressing optimism about the emergence of a new India.
Vodafone CEO Vittorio Colao, however, argued against the government’s proposal to make operators compensate users for call drops, saying such a practice is unheard of in other parts of the world.
Speaking to the media, he said the Indian government needs to decide if it wants to follow a revenue maximization policy from spectrum auctions or keep airwaves affordable to allow telcos to invest more in the long term, which will improve call quality and facilitate Digital India.
Broadly though, Colao, who has been critical of government policies in the past, said he is witnessing a “New India” in which the government is making positive changes towards the ease of doing business.
“I also hear people say it’s (change) not fast enough. I say fine, but it’s also a big country,” Colao said. “Is it (New India) visible in every aspect of our business? No, it’s not, but it’s starting to be visible in enough places. If the pace continues, digitization of the country will happen.”
He pointed to recent decisions on allowing trading and sharing of telecom spectrum as well as the more accommodative stand on taxation as evidence that “things are changing.” He added that Vodafone is open to sharing and trading of airwaves, which will help improve call services. “India is clearly one of the five big pillars of Vodafone Group in the world,” Colao said.
Vodafone is India’s second-largest telco with about 187 million subscribers and accounts for 10% of the group’s revenue. Its annual capital expenditure of Rs 8,500 crore makes it the biggest foreign direct investor.
Colao is on a four-day trip to India, a country where Vodafone has faced a slew of tax cases. Almost all the cases have resulted in favourable judgments for the telco, the latest being a Rs 8,500 crore transfer pricing case. Its major Rs 20,000 crore tax dispute on its 2007 deal with Hutchison Whampoa, which facilitated its India entry, is under international arbitration and is progressing in a “cordial” way, Colao said. He also appreciated the government’s decision in January not to appeal a high court verdict in late 2014, which ruled in favour of the company in a separate transfer pricing case.
Vodafone has revived its IPO plans, which have been considered for several years now. “I cannot give you a date for an IPO. We are positively inclined to it and we have started some preparatory work,” Colao said. “We haven’t made a final decision because there are many factors that can influence one way or the other” such as markets and oil prices.
Vodafone, along with other telcos, have been in the crosshairs of the government on the issue over rising call drops. Colao said Vodafone is working with the government to resolve the issue, but disagreed with the regulator and the telecom department’s proposal to force telcos to compensate subscribers for call drops, saying this doesn’t happen anywhere in the world.
“Personally, it’s not the right solution. Which operator would like to give bad services to its customer? Which leading operator would like to do that? We are sorting that out,” Colao asked. He said call drops can’t be resolved just by increasing investments because that’s not really the cause. Solutions to call drops need to cover aspects such as more spectrum, more telecom towers, access to sites and right of way.
Calling on the government to allocate more airwaves, Colao said India has maximized a lot of revenue out of spectrum auctions by offering low quantities of the natural resource. “The difficult choice is how large the allocation of spectrum it can make and the second problem is also political choices in order to make spectrum affordable enough, then have a lot of investment following it,” Colao said. “Therefore, little bit of thinking of how to make available more spectrum with a longer term view is strategic,” he said.
He added that affordable bandwidth will allow telcos to invest more in technology, which will improve data speeds and quality of services, which will ultimately boost Prime Minister Narendra Modi’s vision of a Digital India. “Vodafone is one the great digital partners of India. We are intrinsically a part of Digital India.”
Vodafone believes the annual capex of Rs 8,500 crore is the right amount, which is the biggest by Vodafone in any market. The company plans to launch 4G services in the main data markets and circles and progressively expand.