Mumbai: There is churn at the top at Vodafone Idea Ltd, with its chief executive officer Balesh Sharma resigning from his position citing personal reasons. Vodafone Group’s India representative, Ravinder Takkar, who takes over as CEO certainly has his task cut out. The company has been high subscriber churn, and the top priority should be to improve execution.
June subscriber data from Telecom Regulatory Authority of India (Trai) shows Vodafone Idea continues to lose subscribers at a brisk pace. It lost 4.1 million subscribers in June, compared to nil losses at Bharti Airtel Ltd. Cumulatively, Vodafone Idea’s subscriber market share has dropped from 38.4% in July 2018 to 32.9% in June this year.
Post-merger, Vodafone Idea fast-tracked the integration of its networks, but the company took time to integrate the sales and marketing teams. This delay has cost the company dearly. Combine this with not so successful minimum recharge plan, subscriber churn accelerated.
Analysts at Kotak Institutional Equities say Vodafone Idea’s difficult-to-explain poor reading of consumer behaviour is a company-specific issue that has contributed to its decline. “The sharp increase in churn and disappointing repeat recharge behavior at the low end was the key reason for 1QFY20 revenue disappointment. The company indicated that they were taken by surprise on both these factors (churn, repeat recharges). In a market where R-Jio is the player shaping consumer behavior in the smartphone segment, VIL’s poor reading of consumer behavior at the low end of the market, VIL’s stronghold, was disappointing,” they wrote in a results review note to clients.
And while the company has been busy integrating its networks, it hasn’t spent nearly as much as it should in upgrading its network. This has also contributed to subscriber churn. “We are particularly disappointed with the pace of capex deployment by VIL. The company has to find a way to step up network expansion pace while ensuring seamless integration at the same time,” Kotak analysts say.
The good news is Vodafone Idea stopped losing better yielding wireless broadband subscribers and has added 1.5 million customers in June. But the pace of additions are too low for comfort. Peer Airtel added 3.1 million subscribers in June and has slightly improved its market share. Comparatively, Vodafone Idea continues to lose market share in the wireless broadband subscribers. “We believe it is crucial for Idea to improve sales execution and network quality to arrest decline in subscriber base,” Edelweiss Securities Ltd said in a note.
It is crucial that Vodafone Idea keeps-up broadband subscriber additions to protect their revenue market share. “We expect this (Vodafone Idea broadband subscriber addition) number to improve once the company is through with the integration process. We believe it’s imperative for Bharti and Vodafone Idea to ramp up 4G subscriber additions to sustain their revenue market share,” analysts at Edelweiss add.