India's telecom industry is in a mess: Vodafone CEO

Blames it on the thinking that more competition is good for the sector

The world’s second-largest telecom operator, Vodafone, facing taxation issues in India, on Thursday said it was difficult for foreign companies to do business in the country because of slower government clearances.

Vodafone India Chief Executive & Managing Director Marten Pieters said the firm had in December last year sought government’s approval to bring in funds from the parent company for buying airwaves but the clearance was still awaited.

“Yes, it is difficult to do business in India. That is the perception of foreign companies in general, not only telecom ones,” said, Pieters at the Economist India Summit here.

The British telco is facing a tax liability of Rs 11,200 crore, along with interest, on its 2007 acquisition of Hong Kong-based Hutchison Whampoa’s stake in India’s Hutchison Essar. He, however, added the process for doing business in India “can be made much easier, smoother by just removing a few things”.

On spectrum auctions, due in February, and raising equity for it, Pieters said: “I have no answer, I got to know last week that the officer dealing with the file had retired.” He said India’s telecom industry was in a mess, mainly because of the thinking that the more the competition, the better it was, Pieters said.

He said industry structure was a government responsibility and he had seen “very little action” to change this system.

“The telecom industry, if you look at it from an international perspective, is a mess in India. It seems to come from this concept that has been developed in the past, that the more the competition, the better,” Pieters said.

“The industry structure is a problem of the government... spectrum, our raw material, is in limited supply, so if you get too many players, you get this problem where nobody has enough spectrum,” he said.

Pieters said he had raised the point about industry structure during his discussions with the government in the past as well, but was told that this was a result of competitive environment.

He gave China’s example, where there were only three players in the space. These operators were all very profitable, offered low rates and had a far better infrastructure, he added. Last year, China invested $50 billion in its networks, while the figure in India was $5 billion, he said.

“This industry structure is the government’s responsibility. I have seen very little action (in India) to change that, to take that responsibility,” Pieters said.

Asked if there was a change in perspective since the new government took over, he said: “In India, the sentiment can change overnight. But that does not mean everything can structurally change overnight... it can hopefully be after 12-18 months.”

Pieters said the information & communication technology initiatives announced by the government were not new and the National Telecom Policy, 2012, was full of such concepts.

“All those are great ambitions... the problem is about getting there. I see that in our industry the thinking about getting there is simply not there,” he said.