Press "Enter" to skip to content

Vodafone Idea says no need for plan B in case funding falls through –

Low data tariffs, floor pricing, and the need for an extended moratorium on AGR dues were also discussed.

In its earnings call for the fourth quarter of FY2020–21, Vodafone Idea (Vi) said that it was fairly confident about capital infusion from fresh investments coming in, and that a plan B wouldn’t be needed in case that doesn’t happen. Vi CEO Ravinder Takkar said, “We are engaged with investors, and we expect growth to take place. I don’t think there’s any need to come up with a plan B. We’re not at that point, and I think we won’t reach to that point. We’re confident funding will take place in the coming weeks.” The company’s balance sheet is currently strapped for cash and the operator is in need of capital infusion to survive.

  • On errors in AGR calculation: Vi had approached the Supreme Court due to alleged errors by the Department of Telecommunications in how the Adjusted Gross Revenue dues owed by the operator were calculated. “We have confidence that the Supreme Court will allow the DoT to make adjustments based on errors and omissions,” Takkar said. “This is an important development we’re looking for, but this isn’t a very big hurdle in the minds of investors who are engaging with us on fundraising.”
  • Biggest hurdle is pricing: Vi repeatedly cast the main issue plaguing the telco (and the industry at large) as the low tariffs for data. “The biggest hurdle stems from the overall industry stress because of the pricing situation. As soon as that is resolved, there will be significant levels of confidence in the industry. That can derive a significant amount of investment,” Takkar said. “The pricing is much lower than it needs to be, whereas the consumption enjoyed is significantly higher than what it used to be several years ago,” Takkar added. He also said that tariff plans that had daily allotments of data didn’t make sense and that a bucket of data with top-up options for users who exceed the allotment would make better sense.
  • Floor pricing is needed: To fix ARPU problems, Vi said that a floor price has to be instituted by the government. “The regulator has started a consultation, where all representation was done” on floor pricing, Takkar said, adding that the outcome of this consultation was going to be key in resolving issues plaguing the sector.
  • Extension of moratorium: Referring to a two-year moratorium on AGR due payments offered by the government in 2019, the company said that a further extension of this moratorium would be required and that it had communicated this to the government. The Times of India reported on Thursday that a letter making this request was sent to the DoT Secretary on June 25. “Unless those big elements [difficulty to make payments for spectrum and floor pricing] are not addressed, in some ways, the stress will continue. In that situation, it’s only reasonable to ask for an extension of the moratorium by the government. And that’s the request we have made to the government, and we think it’s reasonable; other players have said this too, and it’s important for the government to address this,” Takkar said.
  • No timeline for investment: Vi refused to give a potential timeline for when investments would be announced. In response to a question from an investor on a plan B for in case the investment situation or the Supreme Court decision don’t turn out favourable, the company said that it hoped for investments to be announced “in the coming weeks”. Takkar said that there was continued investor interest in the telecom industry.
  • ARPU low because of mix: Takkar said the lower Average Revenue Per User at Vodafone Idea was due to the huge share of 2G users who don’t usually buy data plans. However, Takkar argued, “ARPU addition has been highest in the last five quarters. The right type of customers are coming to the networks, and that will continue. COVID regions have challenges. Otherwise, we’re moving in the right direction. […] Customers are enjoying quality data and coming to us. We hope that momentum continues.
  • On JioPhone: On Google and Jio’s deal to make an affordable LTE handset, Takkar said that he didn’t know how that would work for the Reliance-owned telco; however, he outlined the company’s strategy around handsets: “Our view in this [smartphone] market is that we believe the best option for us is to make decent smartphones available, with Original Equipment Manufacturers (OEMs) as well as Non-Banking Financial Companies (NBFCs) and allow them to buy a phone in a financially suitable way. They can also buy used phones through our programs in instalments.” Takkar added that subsidising handsets was not the way to go for the company, as it entails a high upfront cost for the company and deprives users of choice. “We’re certainly not looking to subsidising heavily. I think we believe more individual choice is good, and that is the right model. What they [Jio] will do, time will tell.”

Quotes are edited for clarity.

Also read