Within days of the Union Cabinet clearing a telecom relief package, Vodafone Idea CEO and MD Ravinder Takkar told Aneesh Phadnis & Nivedita Mookerji that the question mark over a third private player is a thing of the past now. Also, funding can come from new investors, existing promoters or a mix of both, sai. Edited excerpts from the interview:
The recent telecom package is being described as a lifeline for Vodafone Idea. How does the company plan to respond?
The reforms are exceptionally important and the clear message from the government is that it recognises the importance of the telecom industry. Also, it recognises that the competition in industry is important and does not want a monopoly or a duopoly. While we always said we would be the third player, questions were raised about our survival. Now with the reforms, there should be no reason to believe that Vodafone Idea will go away and the telecom market will have less than three players. The confidence that the reforms bring is very important.
Will you make investments now?
The four-year moratorium on spectrum and AGR (adjusted gross revenue) dues will allow us to make investments and continue to focus on network. Our 4G network has coverage for 1 billion people and there is a potential opportunity to increase by 100-150 million. We would like to increase capacity further, provide great experience and introduce new services by deploying cash we save due to the moratorium. That’s the roadmap for us.
Vodafone Plc has ruled out further equity infusion in the company. What is your take?
The biggest concerns of investors have been whether the government wants three telecom players, whether it will ensure enough competition and whether the government supports delays in payment or would it place itself in the front to get priority in payments. The reforms package has addressed the concerns of investors. I see investor interest in telecom and Vodafone Idea particularly change completely and believe that it creates a great opportunity to get external funding. The funding can come from new investors, existing promoters or a mix of both. Whether a particular promoter will participate or not is a choice they will have to make. I expect the fund raising to be more relevant and successful and we expect funding will come in different forms. I think the four-year moratorium period is a long enough time to get the company back on track.
The promoters have refrained from investing as it would mean throwing good money after bad. Will that stand change?
We have never said that. That is not the company position. If a particular investor or shareholder has probably taken that stance, I am not aware. We believe investment in Vodafone Idea is good investment and with the reforms package, the investment thesis has enhanced significantly
Are you comfortable with the government taking a stake in Vi? Won’t that make the telco a PSU after four years on conversion of its dues into equity?
In all my conversations with the government, it has clearly said that the government has no interest in acquiring and running telecom companies in India. The government has a PSU (BSNL) and they have got their hands full. So the message is really the opposite. The government wants us to run the company efficiently and competitively. It is not a worry for me at all as the talk about converting Vodafone Idea into a PSU or the government having a role in running the company is incorrect.
Isn’t tariff increase a critical step that you have to take? When will that happen?
Tariff has been one of the biggest challenges in the industry. There hasn’t been enough discipline and pricing has been used as a tool to kill competition, gain market share and create a scenario of stress. This cycle has played out several times. If we have to fix the industry, pricing has to improve and that has been our stance for a long time. The reforms create a right environment for price increases. Price increases will come soon and will come gradually so that there is no huge shock for our customers.
Will you be the first mover in increasing prices?
We have been increasing prices already. We took the first step in increasing prices for our enterprise base and family plans and Airtel followed us. Airtel did a pricing change on low-end 2G customers and we followed them. Prices have been inching up slowly but it is not across the board. I have always said I will not be shy of increasing prices but I need to be confident that others follow and I will not be left out there alone in increasing price.
Vodafone Idea is often referred to as a third weak player. Is it a comfortable position to be in. Aren’t you looking at becoming number two or number one player?
I think there’s somehow a feeling that to be good and successful you have to be number one in the market, somehow you have to become bigger. In my managerial experience and many years in this industry, that has not been my goal. It hasn’t been a goal for us. Vodafone India was number two in the market for many years and Idea Cellular was the number three player…. I think they were fabulous in that space. Our focus is to provide returns to shareholders. Whether that is done as number one, number two or number three is not relevant.
Currently, your ARPU (average revenue per user per month) is around Rs 100. What ARPU is Vodafone Idea targeting for future?
There are two elements to the ARPU pricing and customer mix. From a market perspective, our 4G customer pretty much pays the same amount as what he would pay to Airtel. The difference with our competitor’s ARPU is due to the mix of customers. We have a higher proportion of 2G customers. As migration from 2G to 4G happens, we expect ARPU to get better. And as pricing in the industry goes up, ARPU goes up for everyone. In India, the ARPU needs to increase to Rs 200 as it was five years ago and eventually it has to go to Rs 300 for the industry to be sustainable and healthy.
