How long will Vodafone take to become No.1?

Vittorio Colao, the CEO of Vodafone Group Plc , the world's largest mobile operator by revenues, considers India an important market.

The Indian mobile market has been witnessing a rate war with the entry of new players.  Colao spoke to Surajeet Das Gupta and Mansi Taneja about the competition, the need for consolidation in the industry and a change in the regulatory regime. Edited excerpts:

Our focus in India is to look at revenues coming in a profitable way and our strategy is based on three things – investments, innovation in new products and services, and expansion into rural areas.

The per-second billing plan has affected the company significantly but we will not be left behind and we will be competitive. Ours is a premium network and we offer good quality services to our subscribers.

The new players are making competition tough Except Bharti Airtel, no operator in the country has a positive cash flow. We made £300 million (Rs 2,283 crore) as margin in India.

Our investment was £500 million (Rs 3,805 crore) in the first six months of this year, so we have a negative cash flow of £200 million (Rs 1,522 crore). This cannot go on. For the whole year, we will invest £1 billion (Rs 7,610 crore) and may have Ebitda (earnings before interest, taxes, depreciation and amortisation) of £600 million (Rs 4,544 crore), but still remain in the negative.

That is why customer service is not of high quality, which has to be addressed by policy makers.

Also, globally, telecom is seeing consolidation. There are too many players in the industry, and merger and acquisition rules should allow easier aggregation, which could be in different ways like aggregation of networks, companies and operations.

You talked about consolidation in the industry. Would Vodafone be interested in acquiring a company here?

We are open to everything, as India is an important market for us. The telecom sector requires huge investments. However, there has to be a different approach to this and rules should allow consolidation and be made easier and flexible. However, the current rules do not allow consolidation.

Vodafone Essar is the second largest private operator (by revenues) in the Indian mobile market. When do you expect to close the gap with Bharti Airtel, the number one service provider?

It could take 25 years, and generally my prediction is right, as it takes a long time to bridge such a gap. This industry needs investment and time. We expected to be cash-positive much earlier but delays happen in this industry. Moreover, the Indian arm has the support of the global parent company.

How important is the third generation (3G) market for Vodafone in India. What would be your strategy in the upcoming 3G auctions?

3G services would open the market, as there would be a shift towards the data part of the communication. We have already seen the markets opening up in Africa, Europe and the Middle East after introduction of 3G services. We expect the same to happen in India.

3G is a good opportunity for us, provided there are not many regulations. Recently, there was a notification by the department of telecom that service providers would need to go for a security check for equipment before placing any orders. This is totally ineffective. It will be a burden on us and increase our cost as well.

Photograph: Vittorio Colao, the CEO of Vodafone Group.