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Lack of spectrum to mar Digital India pitch: Vodafone chief

India continues to remain a vital component in Vodafone’s global operations and the company has invested heavily to make the most of the opportunity.

But in an exclusive interaction with CNBC-TV18’s Malvika Jain in the backdrop of the company’s half yearly results, Vodafone India MD and CEO Marten Pieters spoke about several business and sector-related issues: why he believes the data revolution in India is about to explode and how lack of spectrum will hamper the rollout of the prime minister’s Digital India campaign.

Hello and welcome to CNBC-TV18, I am Malvika Jain and I have with me Marten Pieters the MD & CEO, Vodafone India.

Q: Today you have announced your half yearly results. There is an uptrend that one is seeing as far as data is concerned if you look at the overall revenue. Do you think that this is likely to continue? Is there any support that you require from the government or other telecom players to take the agenda forward?

A: We have seen a great uptake of data services — especially 3G, which is now already 50 percent of our data revenues. We normally don’t ask for support from the government. However there is a very specific situation in India that we don’t have enough spectrum. We have always been starved from spectrum even in the voice period but in data it is far more important to get enough spectrum because otherwise you simply cannot deal with the volumes and speed. If you have more spectrum you can deliver higher speeds and that’s what the customer wants.

So, we have made a strong plea and as you might have seen the regulator has come out also with its recommendations for the next spectrum auctions. We really need more data spectrum to become available because the growth is going so fast that we are already constrained with the spectrum we bought four years ago for 3G. By the way Vodafone, only bought it in half the country. There is no operator in India that has nationwide 3G spectrum. So, we are all using each others facilities roaming on others spectrum, which actually makes it even worse.

Q: If we stick to your business plans are you seeing that there is a downtrend as far as voice consumption is concerned amongst telecom users? Is the number of minutes that each consumer utilizes has that come down or has that had any impact on your overall revenues?

A: We saw in the first half year, the minutes of use per consumer indeed coming down a bit but all the other operators have seen the same. It is mainly a seasonal effect. We have not yet seen a real issue that for example the usage of voice over IP or OTT services is eating into our voice revenue but we can see that the data revenues are growing faster than voice is now growing and that’s not in a way a miracle because most people are now connected on the mobile phone and have developed a certain pattern of use for voice where actually the data world is just starting to explode.

With a lot more smartphones coming into the market you can see that people start to use more applications. Even today the use of video is relatively low where all the predictions are that lets say 2-4 years down the road, 50 percent of the traffic will be video traffic and that’s very heavy traffic.

So, data is the promise for the future but voice is still a very important part of our business. Data was in the first half year 13.5 percent of our revenues but it also means that more than 85 percent is still voice revenue.

Q: For a strong data presence and to be able to provide your customers a very good experience you need to expand your network. You had said that for Vodafone India is going to be one of the primary investment destinations. In terms of network expansion what can we expect, what are your targets at least for the coming financial year?

A: We are clearly rolling out lot of network, not only 3G which is the future model – the data services but also still 2G because for example cities in India are constantly expanding. So, we are also building 2G and expanding cities. We also see the usage going up meaning that we need to build capacity also.

In last 12 months we have opened 20000 2G and 3G sites so that is a massive investment.

Q: Is there a figure that you can give to me?

A: In the last half year we invested Rs 3500 crore only in six months and that’s the kind of trend we have seen last year and which is what turned out for the second half year also. So, there is massive capital going into the network.

It is partly going into radio equipment meaning really customer-facing but we are also investing in our distribution channels, we are opening a lot of new shops – Vodafone stores. We are investing also a lot in what you don’t see as a customer, what we call the backend but it is really the pipes that are necessary to ship the traffic because data traffic is really heavy.

Vodafone India is already the biggest data traffic company in the Vodafone Group where we actually only have spectrum in half the country.

To be updated…

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