Vodafone Group CEO Vittorio Colao was in Malta for a brief visit to launch 4G in Malta, a €10 million investment. While here, he talked to Vanessa Macdonald about the need for the European market to consolidate, the role of emerging markets and the future of a multi-app world.

Given the level of infrastructure and investment required, is there space for small operators in tomorrow’s telecommunications world?

No. The US has four operators for a country of 320 million, while Europe has hundreds for a population of 500 million. And then they are surprised that they are underinvested.

What has changed – which regulators just did not get – is that in the old world of voice, only a very limited capacity was required with relatively limited investment. So a small operator could make a decent living.

But data is superheavy on the network and will continue to require even more support as we start to use more video. In the long run, Europe should have a limited number of operators and, for sure, a very different approach to competition.

You might end up with a market with just two or three players – Germany is considering having three for its 80 million customers.

Will that have an impact on Average Revenue per User (ARPU), which has been declining for years? And the regulator is still saying that third parties should have access to the infrastructure and that roaming rates must go down. Are regulators listening?

I think they are more sensitive today. I see that in all markets, the issue of consolidation is now on their mind and they understand they should stop trying to insist on four or five players, when the investment allows only two or three if it is to be sustainable.

I think there is still a bit of an obsession with roaming. Our industry is not without responsibilities as we probably priced roaming at the wrong level. But if you look at Vodafone’s tariff today, I am using the same tariff that I have in the UK here in Malta (this is a consumer phone and not a corporate one as I want to do exactly the same thing as every consumer).

So we have made progress. But the EU needs to shift its focus from a pure pricing mentality to one that also considers investment and employment, as well as consumer benefits, one element of which is pricing.

Certain countries continue to give spectrum on limited time frames – not in perpetuity as in the US – and continue to try to slice the spectrum into small chunks to allow new competitors to enter the market.

The Netherlands, for example, did an illogical thing as it reopened some spectrum for a new competitor at lower and cheaper rates, which is nonsense, as this is discrimination against people who have already invested.

The EU needs to shift its focus from a pure pricing mentality to one that also considers investment and employment

Technology seems to be developing faster than companies can introduce it commercially. 4G is available in 10 of your markets and now Malta. Is it going to be obsolete before it is rolled out elsewhere?

The future of technology will be to mix all this technology – 4G, 3G, Wi-Fi, fibre, cable, VDSL – in such a way that the customer always gets the fastest possible service and we will adjust to the lowest cost element to deliver that service.

I don’t think we should think of 4G as something that replaces 3G, which replaced 2G, and so on. I think we should see them as technology which has built up.

We will be watching more videos, we will have video conferencing, we are going to be streaming stuff on a variety of phone, tablets and big screens. This will mean a lot of opportunity for media and content owners, as it will lower the cost of distribution and increase immensely the possibility of reaching very vast audiences across the world.

And this will have an impact on ARPU because data is a lot more lucrative.

This will have an impact on ARPU, capex and cost – driving them all higher as we will need more electricity, more storage space, more towers and cables and fibre. And the extra ARPU will be shared with the media and software companies, etc.

The situation in Europe is very different to the one you are seeing in emerging markets where Vodafone is seeing tremendous growth, like Turkey and India. This week, it was announced that regulatory hurdles have been cleared opening the market in the latter. What can you tell us about your intentions in India?

We are committed to India and will continue to invest there. The regulations for ownership have been relaxed, which means that we might consider restructuring the ownership: This does not rule out considering other solutions, like an IPO. India is becoming a normal country where you can consider whether you want partners, IPO, or full control.

More options mean that you can choose the best avenue. We will definitely invest part of our acceleration programme, Spring, in India because we believe in the future of data in India. It remains complicated from a regulator and governance perspective because the country is complicated.

Emerging markets are now 35 per cent of Vodafone, after Verizon, and they are more profitable than mature markets.

Mobile has leapfrogged landlines in many emerging countries, in Africa for example.

That is where the real opportunity lies. This comes from three factors. The first is the demographics: These are young populations, which is very positive for us. The second is the absence of fixed-line infrastructure, which means that for many people the only electronic device for interaction is the mobile phone – even if it is not a smartphone! The third factor is entrepreneurial spirit and the size of businesses, which tend to be fairly small but incredibly active, for which communication and IT tools are essential.

If you own a shop in Kolkata or Mumbai, and you want to buy a second one to talk to your employees on how to manage your inventory between the two, the best way is a simple app, which costs $1, to use over the mobile phone. A more sophisticated solution can go onto a tablet and eventually, you get to the stage where big software companies come in.

Emerging markets are now 35 per cent of Vodafone, after Verizon, and they are more profitable than mature markets

Consumers have so many free apps, like WhatsApp and Skype, as well as free Wi-Fi in urban areas. Is this a problem?

We have been successful with the shift from pricing voice to pricing data. The new Red plan was launched a year ago, and by the end of June, we had 5.2 million customers, who get a huge amount of voice, unlimited SMS and gigabytes of data. So as Vodafone, I provide the platform for them to use WhatsApp, Vibr or whatever they want. But if you use WhatsApp, you eat up your data allowance, while if you make a normal phone call, you don’t – which leaves it for something else like You Tube.

This is the concept behind Red: to allow the customer to do what they want. With high-end Red plans, you even get roaming, which gives you even more freedom. I am confident this was the right strategic answer to “over-the-top” players (a system for the broadband internet delivery of video and audio without a multiple system operator being involved).

If I want to talk to my CEO in Malta, I can call him, text him, send him a Facebook message, an instant message, a Blackberry BBM message, a Skype message, an e-mail – and there are probably several more options.

There are so many communications platforms and the customer will choose whatever is the most convenient.

You see the future as being Unified Communications – which seems to me to be part Big Brother, part social networking. How do you see it?

The security and privacy issue that you raise is very important. As a telecommunication company, we are regulated, which we do not like, but at least being regulated can guarantee that we respect all the privacy and security of the country we are in.

The weakness of the pure ‘over-the-top’ model is that they do not respond to any jurisdiction – or in theory just the one where they are headquartered. This, of course, creates a little bit of a weakness in the model but a very positive differentiation point for me.

If you want a very secure conversation, use the good old-fashioned phone. If you use Skype or something else, I cannot take responsibility for it.

That is why the word ‘trust’ is a key word in our Vodafone credo. We want the customers’ trust – and for the long term.