Vodafone bets big on India 3G, to invest Rs 7,100 cr

 
Vodafone has drawn up ambitious plans to invest 700 million pound ( about  Rs 7,100 crore) in India during the next 2- 3 years mainly on rolling out 3G networks.

This amount will be in addition to  Rs 4,000- Rs 6,000 crore annual investments the company has been making in recent years, Vodafone India CEO Marten Pieters said on Tuesday.

The investment will be part of the cash- rich British company's Project Spring under which the Vodafone Group will invest 7 billion pound by March 2016, to establish stronger network and service differentiation in major global markets.

"The Indian investment is about 10 per cent of pound 7 billion in the next 2- 3 years. It depends also on what is available. The investment will be above the normal level of investment we would have done so it's like a catch up investment," Pieters said.

Riding on a strong growth in data usage and voice calls, Vodafone India said it has posted 13.5 per cent jump in revenue at  Rs 20,476.3 crore for the first half ( April- September period) of 2012- 13.

The company had logged Rs 17,581.3 crore in revenue during the same period in the last fiscal.

Pieters said, India has become the third largest contributor to the UK- based Vodafone Group's services revenues.

" We are also focused on growing the use of mobile Internet. Our data continues to contribute strongly to business, accounts for 9 per cent of service revenue in Q2, 2013- 14 fiscal," said Pieters.

He said most of the subscribers in India would use  Internet via mobile phones but the company doesn't have 3G spectrum in all the circles.

"We will try to get spectrum in all the circles next year. We count on pending approval for spectrum trading and the fresh 2100 Mhz auction in 2014," he pointed out.

On revenue growth, he said it is driven by hardening of rates, exponential growth in data and good subscriber base. "These, however, were partially offset by the effect of seasonality and regulatory changes," he added.

"The service revenue has grown 13.5 per cent to Rs 18,481 crore during the 6- month period from  Rs 16,282.6 crore in the corresponding period last fiscal, but our data revenue has grown much faster at 76.5 per cent. The data growth has been driven by high smartphones usage, he added.

Vodafone India's operating profit or EBITDA ( earnings before interest, taxes, depreciation and amortization) improved by 30.6 per cent to  Rs 6,519.1 crore in H1, 2013- 14, compared to  Rs 4,993 crore in the same period of last fiscal.

Pieters said the environment in the country is more positive these days as the regulatory clarity is emerging. However, at the same time he pointed out that that all is still not fine on the regulatory front.

Meanwhile, Vodafone Group chief Vittorio Colao at a meeting in London on Tuesday said the company will only consider an IPO in India once the $ 2- billion tax dispute is resolved.

"We don't have to do it… because we don't need the money. We need to resolve the tax issue first," said Colao.

Colao added that there was " no real change" to discussions on the tax dispute. " We have had talks and continue to have talks. It's complicated and honestly, we have to see where it goes."

Vodafone posted a 13.5% jump in revenue at  Rs 20,476.3 cr for the first half of 2012- 13.

Telecom tariffs may go up every year: Vodafone MD

India's second largest telecom operator Vodafone expects phone call and other mobile services rates to go up every year, indicating that low tariff regime may not be sustainable any longer for the industry.

"We have lower tariffs for 18 years against inflation of 8-9 per cent per year. Now, can you do that forever? No you can't," Vodafone India Managing Director and Chief Executive Officer Marten Pieters said in an interview.

"So the point has come where lowest has been seen, we will have to increase our tariffs every year depending on cost levels," he said.

He said that like everyone else, the telecom industry too has to increase the prices.

Last month, the company increased 2G mobile Internet rates along with two other players,  Bharti Airtel and Idea Cellular, in the range of 25-30 per cent.

Peiters said that going forward 2G data rates and 3G data rates will be at same level indicating a further hike in 2G mobile Internet rates.

"We started 6-7 times high tariff rate when we opened up 3G network. It is now back to 1.5 to 1.6 times of 2G data rates. It over time will come together. But it can't come over time just by lowering 3G tariff, it needs to also see increase of 2G tariffs. Once it is equal, it doesn't matter to customer anymore," Pieters said.

The company's competitors such as Reliance Communications and Aircel have, meanwhile, reduced 3G mobile Internet rates to bring them on par with 2G mobile Internet rates.

Pieters said that industry will have to work to create efficiency in the network to handle increasing load.

"My assumption is that our price increase will always be lower than inflation but you can't of-course forever keep lowering your prices, its impossible," he added.

In a bid to remain profitable, leading telecom operators have increased rates of special tariff vouchers and reduced free minutes usage.

Bharti Airtel too has said recently that the current tariffs in the country "are at absolutely unsustainable levels".

Pieters said however that despite the tariff hikes India still has the lowest tariffs in the world.

"India has still the lowest tariffs in the world. I think there is only one country which is coming closer, which is China. The only difference being that in China, there are only three operators, they are very profitable and they invested last year USD 55 billion in telecom infrastructure. We did USD 5 billion, so what's better for the country," he added.