Vodafone voices concern over low call rates

Nov 17 2012, 03:13 IST
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SummaryAfter Bharti Airtel, it is now Vodafone, the country's second largest GSM operator, which feels that call rates should go up for telecom operators to run their operations in India.

After Bharti Airtel, it is now Vodafone, the country's second largest GSM operator, which feels that call rates should go up for telecom operators to run their operations in India. Vodafone also wants the government to further tweak the rules for mergers and acquisitions to promote consolidation.

In an exclusive interview to FE, Vodafone's CEO Martin Pieters said that the call rates would go up as soon as the market begins to consolidate. On the issue of promoting consolidation, he said: “Rather than put circle-wise restrictions, the government needs to make merger and acquisition rules national in nature. An operator could have a higher market share in one circle and lower in another and this would obstruct a deal.”

Commenting on the company's financials, Pieters said that amortisation (R7,500 crore) and interest costs (R3,500 crore) are weighing heavily on Vodafone's profit and loss account. Even though the company posted an Ebidta of R8,000 crore at the end of the last fiscal, losses stood at R2,200 crore. “We posted an Ebidta of R8,000 crore at the end of the last fiscal, but we currently have about R30,000 crore of debt on our books and and we are yet to make profits in the country. This is a very unhealthy position and we are aware of that,” Pieters said, explaining how the company plans to retire a large chunk of its debt through an IPO. However, he did not give a time-line. “We will take a call on the matter once we know the policy on refarming and one-time levy for sure,” he said.

On the issue of refarming, Pieters came down heavily on the government, critisising the finance ministry's opinion that given the technology obsolescence in the sector, all the equipment installed for the 900 Mhz band becomes obsolete within 20 years. “Telecom is not like an oil refinery. It's not as if one presses a button and for 20 years the oil flows out, once recovers the cost, makes profit and that's it. In telecom, spectrum networks require constant upgradation and costs keep escalating. We keep upgrading our networks continuously and it is completely wrong to assume that we have recovered our costs”.

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