I make my own mandate, says Vodafone India CEO

I make my own mandate, says Vodafone India CEO

"Vodafone India is one of the major players in the telecoms world and it has changed considerably from a pure local mobile player which was not even nationwide, to what we called a total telecoms company nationwide, and now even extending its services beyond pure telecom as you know, rolling out our M-pesa financial services," says Marten Pieters, Managing Director and CEO of Vodafone India. 

Marten Pieters, Managing Director and CEO of Vodafone India.  Photo: Reuters Marten Pieters, Managing Director and CEO of Vodafone India. Photo: Reuters

Marten Pieters, Managing Director and CEO of Vodafone India, is the country's longest-serving telecom chief executive. A straight talker, he has often been critical of regulators for the poor financial state of Indian telecom. At Vodafone House in Mumbai, he took time out to chat with Sunny Sen about Vodafone's ambitions and the legacy he wants to leave.

Q. You came out of a sabbatical to head the Indian operations. In all these years, didn't you feel like going back?
A. I never felt like taking a sabbatical. I have enjoyed each and every part of it, because I knew India would be a very, very big challenge, because when I joined it was already the most competitive market in the world with the lowest pricing, and it got worse after that. But I have been long in telecom. Can't say that I have seen it all, but I have seen a lot.

Q. What is Vodafone India today?
A.Vodafone India is one of the major players in the telecoms world and it has changed considerably from a pure local mobile player which was not even nationwide, to what we called a total telecoms company nationwide, and now even extending its services beyond pure telecom as you know, rolling out our M-pesa financial services. Vodafone is in a way different in India. It is an MNC. It has a long-term strategy for communication, because that is the only thing we do. Many companies in India are part of a conglomerate, and telecom is one of them, but they have other bets. But this is the only thing we do and we are very focused. The only difference is that we do this in multiple countries in the world.

A. What was Vodafone earlier?

A. More than half of our customer base is rural. Vodafone is at this moment, the second biggest total telecoms player in India which has an appetite for investing. That's the difference. You have seen that in the last spectrum auction. This is going to be an industry, if you want to sustain in the industry you need deep pockets, and there are many companies who can afford that. Vodafone is clearly - with its international strength, international assets and cash flow - able to invest in the Indian market. I think we will need huge investment in the coming five to 10 years in the market, because the basic need of voice, probably 90 per cent, is served. But then there is an enormous market coming, of the data world and application services, because in countries like India there is not much alternative. That is why voice took off - because there was not much of fixed line.

The next phase is about making your life not only easier, but a lot more productive, by using lots of applications on tablets, phones, or even feature phones. I think there we have just seen baby steps. The only limitation is people's imagination. If you see the smart apps being developed today, it is all about creativity. The technology is there, the database is there and there is money to do it.

Q. You are spending about Rs 19,600 crore on spectrum acquisition and another $3 billion as a part of Project Spring. How will that change Vodafone?
A. We expect that revenue will keep growing, and there will be return on investments. This is not charity for India, believe me. It is investors' money flowing into India. India has better growth prospects than any other markets we are in. We have been working in more mature markets which are not growing very fast. Don't underestimate the enormous amount of capital going into the network.
We as operators have been tapping rich voice markets, because voice in a network is very scalable. You can do much more voice, with a bit more capex. Data is not like that. Data is far more linear.

There is some scale effect, but not like voice. Meaning that we are in an investment cycle which really needs to support more than the 100 per cent data volume growth that we had last year.

And in India, where we have 3G only in half the country, we are already No 2 in the Vodafone group in terms of data volume. Germany is still bigger. So in a way it is very early days, 3G is just taking off, and we are only in half the country. It needs massive amounts of investment -in fibre, hubs, data centres. It is very, very big. You don't see it. When the voice network came up, you could see the antennas coming up. You could see the investment. Here, all is underground, in data centres. By far the majority of the investment is going into data.

Q. The biggest challenge when you joined India? Any mandate?
A. I make my own mandate. My mandate was to show the group that it could compete in emerging markets, because at that moment, there was a lot of disbelief from investors that Vodafone was the right company to go into emerging markets. They had done a few investments which were not very successful. They had bought Turkey, they had bought Ghana, which had to be amortised immediately. Then they did India, which was by far the biggest thing they had done in emerging markets. If that had not gone right, it was clear, it would have had an impact on the whole group. My first challenge was to make a success out of India.

Q. How do you make a business case if you don't have 3G?
A. We bought 3G spectrum in two-thirds of the places where we have revenue. When we say we are not in half the country, that's from the circles. Where we have the revenues, we have it. The only place which is painful, where we don't have it, is Bangalore, Karnataka. There are other places where we would like to have it. We have secured our future.
But over time, we would like to have it everywhere. It's a bit like Hutch starting out in 16 circles. They waited a very long to take the last seven, which was the C-circles. That doesn't mean that the company wasn't sustainable without the C-circles. But our ambition level is different. We want to be nationwide with 3G. We can't forever have only 2G services in those place - pricing and availability of spectrum is a big issue in India.

Q. Is 4G an alternative?
A. It is not really an alternative, because the ecosystems for 3G and 4G are not comparable. But for certain applications, where you need high-speed data access, you can use 4G just as well or better than 3G. If you talk about a combination of normal phone traffic, voice, etc, it is not comparable, because 3G has a massive ecosystem. All handsets have 3G, and very few have 4G.

Q. Isn't that a matter of time?

A. Everything in life is a matter of time. In a matter of time, we both will be dead.

Q. Are you planning to be India's biggest data provider?
A. We have an ambition to be one of the major players in data.

Q. Even being part of the top four is being a major player.
A. That's not how we see the market. The focus on being the biggest is, for me, not so interesting. I think it is interesting to be very good for your customers, and make sure you create enough returns for your stakeholders - which is your society, your staff and your shareholders. And believe me, that has nothing to do with being big or small… My strategy is to be sustainable, and for that, you need scale. So to say that I will be No 5 and be profitable doesn't work in this industry. It works in the car industry, where Porsche made more money than VW when they made only made a fraction of the cars.

Q. Reliance Jio, Bharti Airtel and you - is that the new competition triangle?
A. One is still not in the market, so it's very difficult to talk about what is not in the market. I know Bharti is there in the market. For me, it is more important to watch what is happening today in the market, than a future service.

Q. What does it mean to Vodafone India when it becomes the No 2 contributor to the Vodafone group's revenue?
A. I think it already means a lot today, because, based on the anticipation, the capex investment - all based on the assumption that India can grow faster than many other Vodafone operations can, due to the market situation they are in and due to the India development story - that will continue for decades, in my view.

Q. Is M&A something you are looking at?
It is simple. We will have to make a business case for that investment. We need to see a return for the money that you pay for consolidation, and that could have many angles. One could be that you buy revenue, which comes with customers, which comes with some kind of contribution margin. The other could be network, where you can close down some part of network, which brings in operational cost.

Q. Do you want to leave a legacy behind?
A. I think I am working on my legacy every day. When I came, this was a relatively small entrepreneurial mobile company in part of the country. I hope that by the time I leave, this will be a really big, nationwide, total telecoms company, which is a complete institution, and not run by a few strong individuals, based on processes and systems, and very strong management. That is what I am trying to do.
From that perspective, I have an agenda. I am not working, not looking forward to retirement. I am trying to make sure that this company is in perfect shape. There are a few more things that need to happen. The next year is the next challenge, when there will be an auction.