Vodafone Idea is closer than it “has ever been” to tie up the roughly Rs 20,000 crore more it needs from lenders and external investors to take on rivals Reliance Jio and more effectively in the market, the cash-strapped telecom operator’s managing director said.
Completion of the exercise to issue the company’s shares to the government against interest on deferred statutory payment is “just around the corner”, Ravinder Takkar told ET. This is the last box that needs to be checked before the funding is arranged, added the 53-year-old, who has been at the helm of the loss-making telco since August 2019.
There are steady signs of revival and telco is running a “marathon” amid a great sense of “optimism” in the market and within the company, he said.
Takkar said he wasn’t hurt or upset, but was surprised, by a recent comment of Bharti chairman Sunil Mittal that cultural differences between Vodafone India and were a key reason for the struggles of the merged entity.
“By his (Mittal) own admission, his company (Airtel) has been at the brink of collapse multiple times. And by his admission, he has recovered stronger from each one of those. So, if he has seen himself emerge stronger from his tough times, I don’t know why he thinks that we will not fight,” Takkar said in a free-wheeling chat. “In fact, if anything, actually, we’ve never said that we were at the brink of collapse. I don’t really understand the basis of his comments.”
Takkar said he was happy that Mittal believed Vodafone Idea was half a competitor, referring to the Airtel chairman’s comments that India currently had two-and-half private telecom players. “I prefer to be in that position. Because frankly, it’s always good to be the underdog and then fight from that side”.
But to be competitive in the market and arrest losses in subscriber and revenue market share, Vodafone Idea needs to tie up its funding at the earliest, say analysts.
“There’s one more step, which is the government (equity) conversion… It’s just a process that takes time. Again, we hear from the government and the right people that it’s just around the corner,” said Takkar. “It’s very difficult for somebody to put money on the table without knowing what the (government) share will be.”
had opted to defer paying its adjusted gross revenue and spectrum dues to the government by four years, under a government relief package for the telecom industry. The telco has also opted to convert the interest that accrues on the deferred dues into government equity, which works out to be a 33% stake in the company. This will make the government the largest shareholder, but the promoters — UK’s Vodafone Plc and India’s Aditya Birla Group — will collectively hold 50% in the company. The government is expected to complete the process of equity conversion shortly.
As of March end, the company had Rs 1.96 lakh crore of debt, 90% of which was to the government, said Takkar.
For the January-March quarter, the carrier narrowed its net loss to Rs 6,544.9 crore from Rs 7,234.1 crore in the previous three-month period, supported by the November tariff hikes which helped average revenue per user (ARPU) grow, and a one-time gain. Cash and cash equivalents at March end was Rs 1,460 crore.
The company –—has not made any profits since the merger of Vodafone India and Idea Cellular in August 2018 — has been talking to external investors like private equity player Apollo Global to raise Rs10,000 crore in equity and another Rs10,000 crore in debt from lenders.
Takkar said as per the company’s assessment, it needed roughly Rs 25,000 crore to be able to compete effectively and turn around its operations. Of this, Rs 4,500 crore had already been infused by its promoters.
“…we’re working on both (equity and debt funding) of those in parallel, whichever happens first is hard to say…I would say they probably happen more simultaneously than one. Because in some ways, they are a little bit linked, because generally, any lender would like to know if there is a confirmation that the equity is coming in? The discussions are holistic and together,” Takkar said.
While declining to comment if the operator is in talks with Apollo Global for equity funding, Takkar said the funds raised would be for capital expenditure to give it “a more competitive edge in the market”. Jio and Airtel each currently cater to around 200 million more subscribers than Vodafone Idea on 4G, he said, adding: “Prioritisation of capex is on coverage.”
Takkar said sale of assets to raise funds was not a priority currently as the process would take more time.
The telco has been rapidly losing subscribers and revenue market share to its rivals since its merger.
But the executive, who described his task of merging and reviving the loss-making telco as “difficult” and “challenging,” said in a large country like India, having three private players was a great industry structure, and the market was already seeing tariff increases. And with only 58% smartphone penetration and 56% 4G penetration, there’s almost “as much market in front”, he added.
Takkar said Vodafone Idea had recorded three straight quarters of growth in revenue, ARPU and 4G subscriber growth.
“…we have started to see that the brand is starting to stick, the brand metrics are improving and going in the right direction, and there’s real traction in the market. Customer numbers have started to stabilise,” he said. He expects another price increase in 2022 and said the telco would not shy away from taking the lead.
While the carrier’s overall subscriber base continued to shrink in the fourth quarter — to 243.8 million from 247.2 million in the December quarter — the number of 4G subscribers rose to 118.1 million from 117 million and ARPU grew to Rs 124 from Rs 115.
Amid analyst concerns that Vodafone Idea wouldn’t be able to compete aggressively in the upcoming 5G auction, which may lead to further market share erosion, Takkar said the telco would be “competitive” in the 5G market, but declined to share its 5G strategy.
Vodafone Idea is cautious about the high-speed technology and expects it to bring significant results only in the longer term. Takkar said even after the auctions, 5G deployment would take time and would not instantly bring changes to the way the business was run. “It’s not an immediate turnaround,” he added.