The local management team is now looking at the possibility of launching TV services, as well, to be able to provide customers with convergent service packages, he added.
“Now it’s time to start thinking about [providing fixed line services to] the consumer.”
Vodafone, the second largest local player on the mobile phone market, with about 8 million customers, more than 3.3 million of which post-paid users, has been constantly investing in a fiber optic infrastructure in the last few years, using it mainly to connect its antennas and to serve very large business customers without ‘touching’ the consumer segment. Competitors on this particular segment are Telekom, RCS&RDS, UPC and Digital Cable Systems (AKTA).
Under the circumstances, the question is which of the over 7 million households in Romania does the company target and how will Vodafone get there?
The group is considering all the options, including a merger or an acquisition, but also expects Romania to make major owners of fixed networks open them to competitors and thus enabling them to get to the homes of those consumers they want to sell fixed Internet services to, for instance.
“First of all, Romania needs to get better regulation. And I say it blankly and directly, this is the only country where there’s no access to fixed line, while there is access to mobile so this is an unfair situation, where mobile operators are giving wholesale deals to fixed operators but not vice versa. This has to change. My instruction to my team is be a bit more pushy and more demanding on this front, eventually more aggressive. I hope pushy and demanding is enough, ” Colao says.
What he means is that he is asking Romania’s communications industry regulator ANCOM to issue rules that allow Vodafone access at a regulated fee, to the homes of consumers using the copper cable network of Telekom Romania, for instance.
“The issue of opening cable is a debated issue in Europe, but the reality is that one should not look at the technology, one should look at market power. If two companies have between the two of them 80% and none of them is open you can argue that this is not a competitive market.”
Vodafone will probably launch fixed services only in cities, and mainly in those where its mobile operations are strong. Video content packaged together with communications services will become more important in Vodafone’s offers, which is also considering TV.
There has been speculation in Romania a number of times that Vodafone is discussing the acquisition of the local subsidiary of US-held UPC or of the RCS&RDS group founded and controlled by Romanian entrepreneur Zoltan Teszari.
Has Vodafone ever discussed a takeover of RCS&RDS or UPC Romania?
“I never share my diary with any journalist, but this time I will make an exception for you,” Colao answers, adding, before he bursts into laughter, “Do you believe me?” He then tries to answer the question as best as the CEO of a publicly listed group can.
“Let’s be honest. Of course, we’ve had talks with all the important parties, the local team there has the job to find the right solution to our future in the country and the solution will be to do something: cooperation, acquisition, building [fixed infrastructure] ourselves. It will probably be a combination, like in all countries, it’s always a combination, it’s never a single thing also because the country is a challenging country: a richer urban and a relatively not very populated non-urban. 4G would be fantastic for the non-urban, but in urban we need more than just 4G and we will get it.”
Is Vodafone planning to introduce fixed line services everywhere in Romania? No, its CEO says.
“For the urban areas [where we are] so strong [like] here in Bucharest, very strong in the south-east, probably you will see us in fixed line. As I said other times, if we get access (to the fixed network of another company on the market i.e.) we are very good partners, if we don’t get access we are very good competitors. I repeat it, if we get access, we are very good partners, if we don’t get access we are, hopefully, very good competitors.”
Vodafone will continue to invest a lot in its 4G mobile network, especially since this is the right solution to provide service in rural areas, for instance.
“Romania is a bit different from the other markets so we will do a lot with 4G, so 4G in Romania can play a bigger role than in other countries because of population and the density. And if we think that Romania has 60% of the land mass of Italy but 40% or 35% of the population, it clearly is a 4G market more than Italy or other places.”
Vodafone’s plans for the fixed line services for household consumers and its potential entry on the TV market come at a time when Cosmote and Romtelecom have mostly integrated their operations, under the Telekom brand of Deutsche Telekom and Orange, its main mobile rival unexpectedly entered the TV services market via a satellite platform last year.
The rebranding of Cosmote and Romtelecom into Telekom Romania practically turned the new entity into the biggest player on the market by revenue, while Vodafone dropped to third. Is this a problem that can get the UK group to react?
“We are still much bigger [than Telekom Romania] in mobile” and this is not about size, but about the quality of services for customers, the Vodafone official said. “I’m not obsessed with the position and I am not worried by the competition.”
So Romania is not a problem market because Vodafone competes with some of the largest rivals in the industry, it is an important market for the group because this is where it established centers where Romanian specialists provide services for the entire group, Colao said.
“Romania could be for Vodafone, not as a market, as a country, a good country for having here our activities, because this is a country where the quality of engineers is very good and the cost is lower than in most of Europe, but it is still part of Europe so this is a fantastic advantage for the country. We have here our network operating center, we have opened a shared service center, we have 300 people now there, the plan is to grow maybe to 2,000, maybe beyond.”
The UK group is ready for expansion in Romania but the decision will be made depending on the ‘certainty’ the group will have that the telecom market watchdog will make the other telecom operators open their networks like on any EU markets, as well as that its problem with interferences generated by mobile phone operators from Ukraine will be fixed.
“It is a market where we are happy with our position in mobile and where we want to be a bit bigger in fixed line. So it’s not a problem country, but it’s a developing market. We can invest more in the country if the conditions are right. When I say if the conditions are right it should be the regulatory condition, it should be the competition condition. Both of them must be right. In that case, we’ll invest not just in service centers, but also more in technology, more potentially in content, in TV, who knows. But the conditions must be right,” Vodafone group CEO says.
“Competition [condition] is the access to fixed line and regulatory I think we need to get the certainty that the regulator acts quickly in the interest of all the operators whenever there is a problem like the interferences that are happening with Ukraine, intervenes to make sure that things are really what they are described (in papers i.e.) and not different. I don’t want to elaborate too much now but this is clearly a case that has to be dealt with quickly and in a very fair way,” he explains.
The problem Colao is talking about is that part of the frequency spectrum it bought from the Romanian government in 2012, which it should have started using on April 6, 2014 is subject to some significant interference from Ukrainian mobile phone operators, especially in South-Eastern Romania, the annual report of the group reads.
To be able to provide services in the area affected by this problem, Vodafone rented radio spectrum from RCS&RDS and Telekom Romania.
If it had the ‘certainty’ that ANCOM would quickly fix the interference issue and that it would apply the EU regulations about dominant players opening their networks, Vodafone could invest a lot more in Romania, Vittorio Colao says.
“Lack of certainty for the future is what deters investment. I might still like the country, I might still like the people but the certainty that the regulatory and competitive environment is pro-competitive environment is what makes people like me get the courage and say: OK, [we’ll invest] another $50 million, another $100 million. If you’re not sure, you maintain what you have, but this would be a missed opportunity for a country. My sense is that the Romanian government understands this.”
As for the potential launch of TV services, the decision rests with the local management team, Vodafone’s CEO says, adding that the video content segment is very important for the group.
“Video is important, we’ll talk more in November when we announce our results. We’re seeing video becoming very important in some of our markets where YouTube and Netflix together, in certain times of the day, are 50% of our [data] traffic, so it is really our job to be there. We need to make a better job of putting it together with our main subscriptions and starting getting it into the home. “
Getting such services into the home can be done via a number of solutions, either wireless, fixed or satellite, Colao says. There are also hybrid solutions.
“There are many solutions and in this phase at Vodafone after our reorganization in July I’m putting back a lot of responsibility on the markets and local management, Ravinder (Takkar, Vodafone Romania CEO i.e.), Florina (Tanase, head of legal and external affairs with Vodafone Romania)” and the rest of the team.
“They need to find the best strategic solution for their market.”
Asked whether he thought the market in Romania would continue to have as many global players as it does now besides the RCS&RDS group, Vittorio Colao said he did not.
“I don’t think so. I clearly don’t think so. If you look at Europe, if you look at what’s happening in the world, everywhere, de facto, you are going to three major competitors. (…) I think there will be consolidation also in Romania. When, I don’t know, because it takes two to merge.”
Is merging operations the most likely scenario for the local market? It is not the only one, but clearly, a possible scenario that Vodafone would consider, the group’s CEO says.
(English version by Loredana Fratila-Cristescu)