INSUBCONTINENT EXCLUSIVE:
Vodafone Idea’s strategy to retain its pole position in the industry revolves around simplified tariff plans, faster integration and
strengthening its balance sheet, its chief executive officer said, adding that current “unsustainable” pricing “will repair,” given
the consolidation in the sector.
Balesh Sharma told reporters on Thursday the the company will invest in key and profitable areas, focus on
controlling costs in non-priority ones, reduce number of price plans and maintain a minimum low value recharge for subscribers, so all come
under a billing cycle in a bid to raise average revenue per user (ARPU).
He added that the company would focus on expanding 4G at this
“juncture” as India is not yet 5G ready.
Vodafone Idea, with 422 million customers, also aims to use big data and analytics to improve
ARPU, a key industry parameter that has plunged since Reliance Jio Infocomm’s entry in September 2016, which triggered a brutal price war
Vodafone Idea stock closed down 7.4% to Rs 41.10 on the BSE Thursday.
“Industry ARPU has gone down from already low level of $2.6 about
This is unsustainable,” Sharma said
China has an ARPU of $8.4.
Sharma said the industry is bleeding but is hopeful prices will “repair materially” on
consolidation.
Sharma’s comments came on a day Vodafone Idea chairman Kumar Mangalam Birla again met telecom secretary Aruna Sundararajan
Birla had recently met senior government officials as well, to discuss severe cash crunch in the sector and seek a deferral on some
spectrumrelated payments due in March.
Vodafone Idea, which reported its first quarterly results last week, clocked an ARPU of Rs 88
compared with Bharti Airtel’s Rs 101 and Jio’s Rs 131
It posted a net loss of Rs 4,974 crore with operating margin of 8.1% and a net debt of Rs 112,500 crore.
Sharma said it wasn’t just
Vodafone Idea but the whole industry that was suffering
He expects better times in the hope that customers who paid high tariffs for fewer services won’t mind paying a bit more in future for
better services.
The chief executive, however, clarified that Vodafone Idea has no plans to raise tariffs as of now.
“Where in the world
of economics will you give away a product below price when you have unlimited demand and limited supply (I am) very confident prices will
repair materially,” Sharma said, adding that after consolidation, all operators are cash negative
“How long can one keep putting in cash, be negative in cashhow will funding happen”
The telco, which recently announced its plan to
raise Rs 25,000 crore via equity, has chalked out a capex plan of Rs 33,200 crore for FY19 and FY20, including Rs 27,000 crore of fresh
capex and Rs 6,200 crore drawn from synergies largely due to network integration for expanding 4G network to protect its turf against
erstwhile market leader Bharti Airtel and Jio.
The operator said it will concentrate on expansion of 4G, and plans to increase its coverage
to over 80% of India's population by March 2020, from the current 50%.
The company has been on several cost rationalisation measures since
inception and Sharma said the hiring freeze was one such initiative
It will continue to build on the strength of both its brands, Vodafone and Idea, he said.
In an investors’ meet on Wednesday Vodafone Idea
said integration of the two telcos and their respective networks is moving ahead of plan and the company will be able to unlock annual
synergies worth Rs 14,000 crore by FY21, compared with the earlier estimated FY23
The telco, like its rival Airtel, will not subsidise handsets but continue to offer bundled offers with multiple handset manufacturers to
bring down smartphone price points, the CEO said.
