Vodafone Portugal invests “more than 250 million euros a year”, its CEO told Lusa, and although the Nowo deal is not “a matter of life and death”, it raises doubts for the shareholder about the country’s attractiveness.
In an interview with Lusa, the CEO of Vodafone Portugal discusses the consolidation of the telecommunications sector, considering that in Europe it will be “inevitable”, says that the operator will continue in Portugal and that he hopes that the regulators and the government will understand the current situation of the sector and help it to continue to evolve.
“Every year, Vodafone invests more than 250 million euros” in Portugal, says Luís Lopes.
In addition, “we also have a base of people, employees, who not only work for Vodafone Portugal, but we have almost a third of people working for companies outside the group”.
Despite a “difficult context, we have a significant weight in the investment we make and in the role Portugal plays with” the export of services, intellectual property, among others, he adds.
“Now I also have to say that the shareholders or the shareholder Vodafone has seen investment in Portugal as not particularly attractive, for various reasons, and so it’s also up to me, and working with the different entities in Portugal, whether it’s the government or regulators,” among others, “to try and change that perception” that “Portugal is not a good country to invest in,” he stresses.
And this risk of considering the country not good for investment exists, “particularly for many years (…) the regulation in Portugal of the telecommunications sector was a significant problem,” admits the CEO.
However, there are changes, “particularly in the sector regulator with the new administration,” he says, alluding to the new president of the National Communications Authority (Anacom), Sandra Maximiano, who took office at the end of last year.
“We see a much greater openness to dialog, there are certainly points where we disagree with the regulator, but the important thing is that this dialog exists and I see this dialog now existing,” he emphasizes, admitting the possibility of a “positive evolution”.
As for the Nowo deal, “it’s once again a story that won’t contribute and doesn’t contribute to this perception of the country being a good place to invest,” he points out, because “nobody can understand” the decision of the Competition Authority.
“It’s difficult for our shareholders out there, I can’t explain to them why an operation of this size has such an impact. And then once again” they wonder if it’s the regulators in Portugal, if they should invest in the country, he says, which translates into “something complicated”.
“And that’s the debate I wish didn’t exist, on the contrary, that it was a country in which we all want to invest,” he argues, admitting that Portugal has attracted “some investment, particularly in telecommunications infrastructures”, which are the “best” in Europe.
Asked if he had already shared these concerns with the government, the CEO said not yet.
“I haven’t yet had the opportunity to meet with the new government,” which “has only been in office for a very short time,” he says.
Luís Lopes recalls that the telecommunications sector in Europe has been one of the “least attractive from an investment point of view” and that “investors have generally fled” because its shareholder return “is worse” than agriculture, among others.
“It’s the sector that has had the worst returns,” where “often well over 20% [is invested]” of revenues every year, he explains.
Over the last decade, “the telecommunications sector has had returns below its own cost of capital, which means it would have been better to have put the money into something else rather than investing in a telecommunications network,” he points out.
In some countries, the problem “is even more pronounced than in others”, such as Spain and Italy, markets where Vodafone sold its operations because the prospects for a return on investment were relatively slim.
“For example, in Italy, what was done was a sale to another company, but there was a consolidation,” he continues, noting that this is a way of achieving efficiency gains and “thereby producing slightly better returns that can justify the investments.”
In this sense, how does Vodafone see itself as a shareholder if Nowo is not consolidated with the Portuguese subsidiary?
“Nowo is not a company that would substantially change our profile (…), it’s not a matter of life or death for Vodafone Portugal (…), now to have a regulator that opposes this transaction, obviously raises the question: is this country attractive or not attractive from an investment point of view,” he asks.
In Europe, consolidation “is inevitable”. Not least because the European bloc “has hundreds of telecommunications operators, as opposed to markets like the United States, for example, which has three major telecommunications operators and an internal market the size of Europe,” he argues.
For this reason, “American operators work much more efficiently by scale, they have more return, they manage to attract more investment, invest more profitably and create a virtuous circle”. But if in Europe “there are no consolidations, I fear that the sector will at some point have a much more serious problem than some people see today,” he warns.
“In a country where three/four/five networks are built, it’s unlikely” that these “will be profitable” and, therefore, “some operator or some operators or all operators end up not making a return on the investment they’ve made in these infrastructures above the capital cost. And which will they be? In some countries, it ends up being all of them,” Luís Lopes argues.
As for what he expects in three years’ time, he assures us that “Vodafone will continue on the same path” as when it started 30 years ago, “which is to have the best infrastructure networks in the country”.
“We were pioneers in many things in this country, we will continue to be, we are a reference within Vodafone for what we do, we have a very strong focus on the quality of service we provide to customers”, so the message is that “in three years’ time Vodafone will be in Portugal”, he reinforces.
“I strongly believe, we will continue in Portugal, I hope that the regulators and the government create and understand this situation in the sector and that they can also contribute so that the sector continues to evolve, not only creating opportunities for consumers,” so that “companies benefit from these technologies, but that operators also have the incentives to continue investing as they have so far.”
Technology is always evolving “and the country’s competitiveness depends to a large extent on the telecommunications sector and the health of the sector,” he adds.
