Vodafone calls on Brussels for help replacing lost roaming revenue

By Sophie Sassard

BARCELONA, Feb 28 (Reuters) - The European Commission should help telecom firms by cutting spectrum costs and allowing more mergers to help offset the loss of revenue from the end of roaming charges in Europe, Vodafone Chief Executive Vittorio Colao said on Tuesday.

Speaking on the sidelines of the annual Mobile World Congress, Colao said he had a good meeting with Andrus Ansip, Europe's digital single market commissioner.

However, the Italian executive said the European regulator was still underestimating how the present regulatory framework hindered the capacity of telecoms firms to sustain investment as revenue and profit declines.

"There continues to be a missing element in the debate: the awareness of how much investment is needed and how low the returns are," Colao told reporters in Barcelona. "We are celebrating the death of roaming but nobody has figured out how to replace revenues for telcos".

Colao said, for instance, leasing spectrum to operators for a fixed period as is the case in Europe made no sense and regulators should look to the United States where companies acquire frequencies in perpetuity.

Telecom companies argue that the U.S. model means they can make long-term investment decisions safe in the knowledge they don't run the risk of losing the asset at some point in the future.

On net neutrality, Colao said Vodafone was in favour of a balanced approach around "fair usage" of data to avoid market dominance by telecoms companies while making the field economically viable so they can keep investing.

"If net neutrality is strictly applied, there will be no innovation", Colao said.

Net (LSE: 0LN0.L - news) neutrality is the principle that internet service providers should treat all data in the same way and not discriminate between users or types of web content, or charge different prices depending on the kind of traffic.

MORE CONSOLIDATION

Vodafone's chief said Europe also needs to look at U.S. policies in the area of consolidation and allow players operating in the same market to combine and reduce costs.

"Big deals are getting done in the U.S. while in Europe small deals are being blocked", said Colao, expressing frustration that the sale of its operations in New Zealand to Sky Network Television (Frankfurt: A0ETX2 - news) was blocked.

Colao said he was open to more deals, either to rationalise Vodafone's assets and get out of certain countries, or to merge with rivals to grow or expand into broadband services.

He said, however, that in practice getting all the stars aligned remained difficult as the company first needed to agree a deal with a third party and then get approval from regulators.

In India, Vodafone is in talks to merge its Indian subsidiary with Idea Cellular (BSE: 532822.BO - news) to create the biggest mobile firm in the country and fend off cut-throat competition from new rival Reliance Jio Infocomm.

Colao said the talks were still progressing but there was no certainty a deal would materialise.

In Europe, Vodafone said it was focusing on making its joint venture with Liberty Global (Frankfurt: A1W0FL - news) in the Netherlands a success and would advise in the future whether it made sense to broaden the alliance.

"Vodafone-Liberty Global is still an attractive combination, especially if the EU wants the creation of a real Pan-European player," Colao said. (Editing by David Clarke)