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Voda UK CEO says one thing about not-spots, Minister of Fun says another

Gov, biz duke it out over coverage and licensing plans

Don’t hold your breath for better mobile phone coverage. While Vodafone UK CEO Jeroen Hoencamp is hopeful that the government will do its bit as part of the not-spots agreement, Minister of Fun Ed Vaziey claims he’s already done it.

We asked Hoencamp how he felt about having signed up to the not-spots deal when all the government had promised to do was “look at” spectrum pricing and planning permission. He said: “Am I uncomfortable committing to something where I don’t know what the other end of the bargain is? Yes. A little bit. But I trust Ofcom that it will be a real debate, I think the more challenging side of things is to work with the government and all the other stakeholders to change the ECC. It’s just harder, but it’s not for lack of willingness. But we are willing to commit.”

His concerns with dealing with government are well founded. When we confronted the minister with Hoencamp’s concerns, Vaziey told us that the government had “done its bit”, and that the mobile networks had been ”given the spectrum for nothing”. This is strictly true for the 900MHz and 1800MHz frequencies, but the networks do pay £64m a year maintenance and the government wants to raise this to £223m. More significantly, the networks paid £22bn for the 3G spectrum.

“There were the good old days when we paid fortunes for 3G spectrum," Hoencamp said. "If you are looking at a spectrum auction, the price will be determined by the spectrum you buy, but also partly by the requirements. The industry would pay a lot less if there were very stringent requirements to build, combining it with changing the landscape. Changing what we pay and how we can operate the network more efficiently would be a perfectly good starting point to have a much more significant coverage obligation, whether its population or landmass.”

But Vaziey thinks things are fine. He disagreed with our saying that independent research has found the UK to have the worst mobile coverage, particularly on trains, saying that the UK had a good mobile phone network.

That’s not Hoencamp’s view. He told us: “People say ‘why are the networks better in other countries?’ and that’s because the regulation works the other way around. In many countries I’ve operated in, you are presumed to get permission to build unless told otherwise, the time period is a lot shorter and there is a very clear decision-making [process]. Here it is the other way around – it takes us 18 months, start-to-finish, to build a site, all going well. Eighteen months. It takes my guys six weeks to build the thing – building the site is not the problem. We really, really need to get behind it.”

The Minister of Fun painted a rosy picture of UK mobile infrastructure, describing the MIP project (which with a £150m budget managed to build two sites on existing towers) as “a learning experience”, but said there would be 30 to 40 new sites soon.

The debate may not be Vaziey’s problem for long. Both the spectrum and planning permission issues are out for consultation, and while they are due to report before the election, nothing will happen until after. Whoever is in charge, Hoencamp – who recently climbed one of Vodafone’s 42m masts – is clear on what he wants.

“You are going to need taller masts. Unless you want to put a mast every couple of hundred metres in the Brecon Beacons, you are better off putting one 40 metre tower right in the centre of it or at the edge of it and guess what? The you can cover the Brecon Beacons, if we decide that’s what we want.”

However, Vodafone is more optimistic about spectrum. Matthew Braovac, Vodafone's head of competition and regulatory affairs, said: “We are engaged in fruitful discussions. We think they are still way above where they should be. Let’s think about it: the first number they thought of was 'let’s take £302m a year out of the mobile industry'. Then they said 'let’s take £246m out of the mobile industry'. Now they've said 'let’s take £223m out of the mobile industry', still a big number and given what Jeroen has talked about on return on capital, we think too high, significantly too high. I think the Treasury understands that connectivity is an enabler for growth. I think they do take a balanced view – the more you take out, the less that can go into the network. You need to find the sweet spot and I’m not convinced that they have got it right. It’s £64m today, going up to £223m.”

It might sound like this is like buying jewellery in an Egyptian souk, but Hoencamp thinks Ofcom is pretty professional.

“From a consultation point of view I have to say Ofcom is consistent in their approach, they are professional, they are knowledgeable, they do really listen, they do take things on board,” he said. But he continues: “It is simply an economic fact you have a certain amount you can invest and we are not exactly shy in investing – over the last year we have invested nearly a £1bn – but you can only invest it once, so either I pay it to the Exchequer or actually build the network. That comes to your point of 'are you willing to sign up for more coverage?' Well, you know what? We could sign up for more than today if there wouldn’t be any increase in licence fees, there would be easier regulation and it was easier to build, because the biggest challenge we have this year is spending money.”

While the government is remaining vague about what it will do for the networks and the networks are committed to doing "something", it's hard for us to know exactly what the deal is – because despite our regular chasing the Ministry of Fun hasn't yet published the 2014 agreement. ®

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