Pricing is a strategy, not a long term differentiator: Vodafone India
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New Delhi: The financials of Vodafone Group Plc may have come under stress because of the non-cash impairment on Indian operations, but its decision to invest Rs47,700 crore of equity in India has reduced the debt at Vodafone India by more than half. The company is prepared to tackle the intensifying competition, said Vodafone India chief executive and managing director Sunil Sood. Edited excerpts from an interview with Sood and Vodafone India chief financial officer Thomas Reisten:
Reducing the value of one of the most significant units does not augur well considering you were planning an IPO.
Sood: Well we have never given any timeline for the IPO. We said we are preparing for an IPO and the board members have announced to the public that the likelihood of an IPO in this fiscal year remains low and so there is a high chance that we will move to the next year. They have instructed us to keep the preparation in high gear and on a short-notice basis, they will tell us to launch our IPO. So, we continue to keep our preparation going for planning and executing an IPO.
On one side, your parent has reduced the value of Indian unit and on other side, you have intensified competition in the domestic market; is there a chance of the IPO getting deferred further?
Reisten: Well, this is an accounting related matter and a Vodafone Group related matter. This is a decision that will be taken strictly at a future point in time...
What is really important to understand is that overall, as a business, we are looking at a period of volatility in the market; in the future, we see opportunities on a variety of points.
One, obviously we are seeing that market consolidation of smaller players to happen as an opportunity for the future. Secondly, if you just look at the potential this market has on data revenue growth, it’s actually very, very strong, there is a lot of potential we can use going forward and you see that already as the latent demand that currently has been unleashed in the market, and going forward, we will for sure see this beneficial for us as well.
Sood: We have been preparing and seeing that the potential which is yield (the potential that is being realized by the uptake of 4G services) by some subscribers in the free offer itself shows us that their needs and wants of data could continuously grow and we look at that as a positive opportunity in the future and to cater to this high growth rate and high data quotas, we have now got a substantial amount of spectrum.
In fact, in 75% of our data market, there are more than three carriers of 4G spectrum available and so, we can cater to this high growth and high demand of quotas in terms of spectrum and data. We have also focused on increasing the consumption on these data quotas by launching Vodafone Play...(which) has really been a big hit in the market... So, the content play has also become important because once you give high quotas what are they consuming it on.
How have you utilized the equity investments by your parent?
Reisten: We have had Rs47,000 crore equity investment into the country and this is being used for both repaying debt and purchases of spectrum and capex.
On the debt position, it has obviously changed. We have now Rs35,430 crore of net debt, which has substantially reduced. It provides us the flexibility to continue to invest in our data network.
In the context of what your global CEO has said regarding Reliance Jio’s free offerings, what if Jio stops free welcome offer but still offers services at a nominal rate?
Sood: We don’t want to discuss future strategies based how Jio plays out and we can’t predict what he (Mukesh Ambani) does. What we can say is it is not only about pricing. Pricing is a strategy, which is not a long term differentiator. So, we are catering to the many Indias within India, there are many markets within the Indian market. There is a non-data market which is 25% of our base, there is the 2G market which is 45% of our base and there is a 3G and 4G market which is about 31% of our base. So, we have a fragmented approach which caters to all these segments.
Will you offer voice over LTE?
Sood: We do not talk about our technologies. We are looking at customer experience and that’s what is key to our consumers. We have announced that we will roll out 4G services to 1,000 towns, now we have revised that, after the spectrum auctions, to 2,400 towns and villages within this fiscal.