London: Telecom firm Vodafone Group Plc. wants to enter rural India to improve its penetration. India has been a robust growth market for the mobile phone firm despite low penetration, chief executive Vittorio Colao said in an interview. Edited excerpts:
Industry watch: Vodafone CEO Colao says mobile telephony may be a bit more variable than other sectors but it is intrinsically resilient. Xavier Mikel Laburu / Bloomberg
Just to kick off with the numbers, how difficult is this market?
Clearly, there is less visibility about the future than in past years. Still, (we) have a very strong ability to forecast our cash production, our ability to reward shareholders and idea of profitability of business. But in terms of revenues in challenging times, (we) prefer to give ranges in terms of achievements and then manage different economies.
So when the markets are getting excited about green shoots, from a business point of view, you don’t quite see the same thing?
In our business, we can look at three or four things: where people go; do they travel; do they call more people; (are they) more careful with spending. And (I) have to say, (we) haven’t seen a big change, so we have to be cautious and watch signs carefully but be prepared for any scenario.
Are you surprised that the mobile market has been affected more by the downturn than some thought?
Not sure. We were first basically, last July, in saying we were seeing an impact in some markets. Mobile telephony absolutely needed service, but how much use depends on how the business is going, whether people are hiring.
So, in a way, (the industry is) a bit more variable than other sectors but intrinsically resilient, a very needed service for families and enterprises.
Some firms like to see greater scale. Are you working on that?
We are working on it. When we announced a £1 billion (Rs7,380 crore now) cost reduction programme, we had a target of 50%. Now, we want to exceed 65% but we want to announce things once we are sure of what they are and who (would be) responsible. So, looking at things going faster and going deeper.
So, watch this space?
Every company has to watch this space. I wouldn’t be surprised if any company would be interested in looking at deep cost reduction optimizations.
What about the broadband business?
Broadband is going well. One of the areas we always believed in, among the first to invest, has been in wireless broadband. Still, we have 26% growth in many mature countries; and about emerging wireless broadband, we are optimistic. Now, we are adding fixed broadband in many markets.
What’s been your outlook on India?
In general, two things are important for business—stability, long-term investments. Clear majorities and clear ways to be consistent across legislation—both outcomes there from the elections, so outcome’s good.
We see a lot less growth from India. What’s your outlook for Indian business?
Penetration today is around 35%. We plan to keep growing at 28%. We are going into rural areas. Penetration will continue to be an important driver of growth. It (India) may have less growth but growth is pretty robust. So it’s a very important platform for us.
Are you looking to expand in emerging markets?
This year we will probably invest same order of magnitude, assuming profitability of rural areas. So, India is core for investment, and Africa. But core is really delivering in India and markets where we are. And, of course, in Turkey.
In the US, you still have stake in Verizon (Communications Inc.). The previous management wondered if you want to own something completely. Are you more relaxed?
You used the right word—relaxed. It’s easy to be relaxed when you own 35% of such a good performing company—great cash flow, largest wireless company in the US, very innovative. Yes, (I) am relaxed because this is a very good asset.
No pressure from shareholders to do something?
We are there, have a big stake, good commercial and technical cooperation and very good partners with Verizon Communications, doing right things for the company that is the leader in the market.
What would be your focus for next the 6-12 months?
I have three real priorities: First, to keep the ability to reward shareholders and keep cash regeneration at levels we want; second, to make sure we continue to innovate and get air space in this new IP world; and third, customers and brand. Our brand is now ninth in the world and we need to keep continuing to think of customers and brand.