New Delhi: Vodafone India Ltd posted an increase of 13.3% in revenue during the six months ended 30 September although a profit remained elusive for the country’s second largest mobile phone services provider by market share.
In the fiscal first half, the local unit of London-based Vodafone Group Plc. reported Rs.17,581.3 crore of revenue, compared with Rs.15,511.6 crore in the same period last year, the company said on Wednesday.
“The growth was mainly on account of increased cost efficiencies and better customer acquisition costs,” managing director and chief executive officer Martin Pieters said.
Revenue could have been more but for the enforcement of new regulations pertaining to value-added services activation and consumer protection regulations, including processing fee besides intense competition that has dented the profitability of mobile phone companies.
Vodafone’s earnings before interest, tax, depreciation and amortization (Ebitda) margin—a key metric of operating profitability—widened 2.8 percentage points to 28.4% in the six months ended September from 25.6% in the year earlier.
Despite the healthy margin, Vodafone, which entered India in 2007, hasn’t made a profit yet from its operations in India, a company executive said.
“Overall, the results seem to be marginally better than the other operators and in line with expectations,” said a Mumbai-based analyst with a foreign brokerage, requesting anonymity as his company does not authorize him to speak to reporters.
The company doesn’t publish earnings, or debt figures, in the country where it isn’t listed on the stock exchanges. Chief financial officer Colman Deegan, however, said Vodafone India had a loss for the previous financial year of Rs.2,200 crore on account of high finance costs.
Costs have been mainly on account of the huge investments it has made in rolling out services in new telecom zones and enhancing its coverage of the country. Depreciation costs and borrowing rates as high as 11-12% made it difficult to earn a profit, Pieters said.
“Vodafone Group has so far invested around Rs.51,000 crore in the country and paid the exchequer around Rs.48,000 crore as taxes, licence fees etc. No money has gone back to the investors,” Pieters said. “The level of payments to the government in India is too high and the government should be careful before taking any more money from the sector given its health.”
Phone companies have struggled to earn profits in the world’s second biggest cellular phone market as intense competition forced service providers to cut tariffs to attract customers and raise the market share.
Non-voice revenue for Vodafone India fell to 14% of revenue with data usage at 5.7% of sales, Deegan said.
The telco had 32 million active mobile data users of which 2.1 million were 3G users, at the end of September. The company has the highest post-paid mobile user base at 7.9 million; 90.1% of its total 153 million subscribers are active users.
On the one-time fee the government is charging from existing service providers, Pieters said the telcos would take the government to court as the policy change was in contravention of the contract that the companies have with the government.
As for the reallocation of the spectrum that’s to be vacated by existing mobile phone operators, Pieters said: “Refarming is not possible in India given the low amounts of spectrum.”
While declining to comment on the ongoing auction of 2G spectrum in the 1,800MHz band, Pieters said that the base price should not have been based on the price discovered in the 3G spectrum auction.
Pieters said that at the time of the 3G auction in 2010, the market was very different. Then, the companies were in a far better shape and could spend that kind of money. The economy was growing faster and subscriber numbers were at 300-400 million, leaving plenty of room for growth.
“The government has to put a reserve price but it cannot be based on the previous auction,” Pieters said.
On a planned initial public offering of the company, Pieters said that while Vodafone India was serious about going public, the lack of clarity in regulatory issues, including when the spectrum will be available and at what price, and also the issue of licence renewals had forced it to hold off on the sale of equity.
“Once the auction is done, then there should be more clarity,” Pieters said.