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Vodafone lambasts regulatory climate
Published on 21 Jun. 2010 10:57 PM IST
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In an unprecedented reminder of India’s degenerating telecom regulatory and investment climate, Vittorio Colao, the global CEO of Vodafone, personally met PM Manmohan Singh to explain the company’s concerns and seek the PM’s direct intervention.
Vodafone, the world’s largest mobile operator and India’s leading foreign investor, was recently forced to write down the value of the group’s business by over 25%, or 2.3 billion pound (nearly Rs 20,000 crore) because of regulatory developments, stated Economic Times.
Vodafone invested $12 billion to buy into India’s telecom sector and invested another $4 billion since its entry. A pan-India operator, Vodafone has paid over Rs 13,000 crore in taxes and fees in the last two years alone. Its rural network is the second largest in India, even ahead of BSNL.
After the release of Trai’s recent proposals on 2G spectrum licensing and pricing, some leading telecom operators have been up in arms. The ToI reported on June 16 that Sunil Bharti Mittal of Bharti Airtel, Colao of Vodafone and Kumar Mangalam Birla of Idea had been forced to personally complain about the regulatory environment.
According to sources in the PMO, Colao flew in to Delhi for an urgent meeting with Singh on June 1 and flew out the same day. Colao further encapsulated his concerns in a letter to the PM. Vodafone is normally conservative in representing its views or seeking policy changes and for the firm to take up issues of concern at Colao’s level with the PM reveals the level of desperation that the firm has been brought to. Colao admits, “in terms of the regulatory environment, we face a critical situation”.
Making three main points, Colao, in his letter, points out that Vodafone’s investors in London and New York have become increasingly concerned that the fiscal and regulatory environment in India is not conducive to successful investment. “Recent articles in the Financial Times, Wall Street Journal and other leading publications have raised questions over returns on investment. I believe that it is strongly in the interests of India to remove this uncertainty and re-establish a stable and encouraging regulatory and fiscal environment as soon as possible ,” he writes.
Further, specifically complaining against Trai, he says, “Just as the industry is balanced precariously, the Trai has produced unexpected and counter-productive proposals. If implemented, these proposals would tie up the industry further, removing substantial revenue and penalising companies like ours which are investing the most, particularly in rural areas. Paradoxically, this would benefit instead, companies which have invested much less and are making much lower contribution to the exchequer,” Colao says.
Colao further draws attention to the fact that “scarcity of spectrum remains a critical impediment to developing telecommunications services, as Indian operators hold an average of 6 MHz of 2G spectrum compared to an average of 22 MHz internationally”.
According to Colao, “Trai’s proposals need to be re-thought urgently to create a platform for sustained growth of Indian telecom over the next decade. Proposals for discriminatory spectrum caps and one-off fees should be replaced with a sustainable spectrum pricing regime.”

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