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Vodafone chides India on taxes, red tape

NEW DELHI — India’s battered telecoms sector risks missing a huge opportunity to develop next-generation broadband services on account of heavy-handed regulation and slow-moving political reforms from Prime Minister Narendra Modi’s government, warned the outgoing chief executive of Vodafone in the country.

NEW DELHI — India’s battered telecoms sector risks missing a huge opportunity to develop next-generation broadband services on account of heavy-handed regulation and slow-moving political reforms from Prime Minister Narendra Modi’s government, warned the outgoing chief executive of Vodafone in the country.

The stark comments make Mr Marten Pieters, who leaves his post at the United Kingdom-based telecoms group this month, one of the most prominent foreign executives to complain about limited progress in improving India’s business environment under Mr Modi, who reaches his first anniversary in office next month.

Vodafone is India’s second-largest telecoms company by revenue and one of the country’s largest foreign investors, having spent more than US$12 billion (S$16 billion) developing its business since launching there in 2007.

However, the group has endured a slew of problems from a highly publicised US$2.6 billion tax dispute to frequent battles over what it complains are inadequate and excessively expensive supplies of telecoms spectrum — most recently when it spent a further US$4 billion in India’s most recent auctions last month.

India’s issuance of spectrum in bits and pieces has driven up prices and left telecoms groups with roughly US$55 billion in net debts, Mr Pieters said in an interview.

“The government has been very focused over the past few years to tap this industry as a milk cow,” said the plain-spoken Dutch executive, describing the sector as being in a fundamentally worse condition than when he took up his role as chief executive officer in 2009.

These debts now mean operators are unable to roll out services to rural areas or invest in new broadband infrastructure, hurting telecoms operators as well as companies in fast-growing sectors such as e-commerce.

“We have a huge broadband penetration problem in this country,” Mr Pieters said. “We are worse than Kenya, we are worse than lots of other countries, which are supposed to be much less developed than India.”

“There is such a huge opportunity to build ... services that would help both economic and social development,” he added. “But by driving the prices up ... you create a debt overloaded industry.”

Mr Pieters said Vodafone had seen minor improvements in some areas, citing government efforts to put regulatory applications online and New Delhi’s decision not to appeal against a recent tax victory for the UK group.

But he said conditions on the ground had yet to improve with telecoms companies still facing excessive taxes and charges, which saw Vodafone pay nearly 30 per cent of gross revenues to the government.

“In general, there is too much bureaucracy for the wrong reasons,” he said. “Tax collection has been extremely aggressive and we have not seen much change there yet.”

Nevertheless, Mr Pieters said Vodafone remained committed to investment in India and suggested the market would become at least its second-largest by revenue, up from fourth behind Germany, Britain and Italy currently.

Vodafone will also begin rolling out super-fast 4G telecoms services later this year, he said, although its focus would be on expanding take-up of more basic data services, where “massive” opportunities remained for growth.

“India has huge potential (for Vodafone), not only to become No 2, but also perhaps ... how it will develop further,” he said.

“We just bought spectrum for 20 years. This company will be around for 20 years and a lot can happen in 20 years.” THE FINANCIAL TIMES

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