Vodafone CEO Vittorio Colao targets Jio in a letter to telecom minister

Vodafone CEO Vittorio Colao may meet FM in Dec to discuss tax disputeVodafone Group CEO Vittorio Colao — in a letter dated August 22 written to India Communications Minister Manoj Sinha – is directly targeting Reliance Jio.

Vittorio Colao, who urged the Indian government to cut interest rates on deferred spectrum payments and against slashing mobile termination charges (MTC), said telecom regulator TRAI should not protect the interest of Reliance Jio.

“We hope that the Inter Ministerial Group will recommend a reduction in the interest rates for deferred spectrum payments to 6.25 percent in line with the improved macro-economic trends and an increase in the period of payment for spectrum,” Vittorio Colao said.

The UK head quartered telecom operator mentioned it has invested over Rs 1,340 billion in India to build its mobile network.

“On mobile termination charges, we are alarmed to see reports that the telecom regulator TRAI is considering a reduction in MTC at a time when the industry is facing such immense hardships. Any reduction in MTC risks large scale site shut-down of already unprofitable sites in rural India and which would greatly diminish the population coverage of mobile telephony,” Vittorio Colao said.

The task of the IMG is to examine systemic issues affecting viability and repayment capacity of the telecom sector and furnish recommendations for resolution of stressed assets.

The group, comprising officials from the Finance and Telecom Ministries, was set up after top banks expressed concern about financial stress in the industry.

“We request your urgent intervention to safeguard the future of the telecom sector and ensure that there should be no further reduction in MTC as it would destabilise the sector, defeat government’s rural coverage objectives and cause huge inconvenience to citizens, in particular, in rural India,” said Vittorio Colao in the letter.

There is a view being propagated by the new telecom operator Reliance Jio Infocomm that as a 4G-only operator, it has a cost advantage of 70 percent compared to established 2G/3G/4G operators in India.

“There is no evidence — either Indian or international — to support such a claim,” Vittorio Colao said.

It is clear from the TRAI industry workshop on MTC, that Reliance Jio has assumed growth of an implausible level of paid traffic on its network. Present traffic levels are a result of promotional activity and generated by incurring huge losses.

Reliance Jio is assuming that it can recover its costs many years into the future. Continued under-pricing of services leads to an increasing cost per subscriber, recovery of which will require higher ARPUs in future, which is unfeasible/ unrealistic.

“It is undesirable for a critical core industry like telecom to be regulated based on the ambition of a new operator with no history of financial sustenance,” Vittorio Colao said.

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