Vodafone Idea in talks with gear vendors for 5G rollout

New Delhi: Vodafone Idea is in advanced discussions with telecom equipment makers for its 5G rollout strategy and will comply with minimum 5G rollout obligations, chief executive Akshaya Moondra said on Wednesday, indicating that the No. 3 carrier will launch its services in select cities soon.

“We have live 5G clusters in Delhi and Pune where we have partnered with various OEMs to test compatibility of available 5G handsets. Further, we are in advanced stages of discussion with various network vendors for finalization of the rollout strategy,” Moondra said in a call to discuss December quarter results.

“Our effort will be that as soon as funding is in place, we will expedite our rollout to have a presence in the geographies which matter, particularly in the context of 5G, so that we are able to compete as early as possible,” he said.

On 5G minimum rollout obligation, Moondra said, “I think that is not a large investment and that is something which will comply.”

The minimum rollout obligations state that telcos have to launch services in licensed service areas in both metro and non-metro cities in the first year of spectrum acquisition. The government allocated 5G spectrum to all carriers on 18 August 2022.

“5G is a part of our plan. It is clear that we will be starting a little late compared to the competition, but I believe that 5G is evolving,” he said.

He also said that Vodafone Idea is in early stages of 5G deployment and that there is no change in the overall trends in terms of subscriber movement across categories.

The loss-making carrier, in which the government has taken 33% equity, said that it will repay existing bank loans on maturity and that new funding will be focused on investments, for which it has begun talks with a consortium of banks since the government’s pre-condition for converting interest on dues into equity had been fulfilled.

Vodafone Idea needs to raise ₹20,000 crore in debt and equity from investors to plough into 5G deployments and operations to stay afloat in the competitive telecom market, where rivals Reliance Jio and Bharti Airtel have rapidly expanded 5G services.

“The requirement of the banks was the government conversion. We have had significant discussions with our consortium of bankers over the past few months. With the government conversion now having happened, those discussions can progress further. We have already started engaging with them and the discussions are progressing as we speak,” Moondra said, adding vendor dues are being cleared on priority.

He noted that the telco had converted interest on adjusted gross revenue (AGR) dues of ₹16,000 crore into equity of 33.1% which is now owned by the government as part of a relief package given last year. Further, the board approved issuance of optionally convertible debentures totalling ₹1,600 crore to one of its tower vendors, American Tower Corporation India. The carrier owes up to ₹3,000 crore to ATC and about ₹7,000 crore to the other vendor, Indus Towers, with which it has entered into a payment plan with softer terms.

Moondra said the carrier is in talks with the government to get longer payment terms for its outstanding dues from license fees for the December quarter, for which it has made a partial payment. It currently owes the government ₹41,300 crore in regular license fees and spectrum charges, which include regular instalments, and those arising from the deferment mooted by the government’s reform package.

“Generally on the AGR front, the final figures are to us communicated by DoT. But according to our calculations, there is ₹ 9,100 crore of original instalment, and ₹ 7,400 crore in dues rising due to deferment,” he said.

On spectrum charges, the company currently owes ₹ 14,000 crore of original instalment dues and ₹ 10,000 crore arising due to the deferment, he said.

Hinting at tariff hikes, Moondra said the telecom industry should quickly move to a structure where consumers would have to pay more for using more services.

“My personal belief is that the current structure of pricing should evolve to make people at the higher end; those who are using more (data or call), pay more. That is a direction towards which we want to move quickly,” he said.

On following rival Airtel in raising the entry-level tariff to ₹ 155 from ₹ 99, Moondra said the company will decide on the steps it will take but for now it is on a wait-and-watch mode.

Vodafone Idea widened its net loss to ₹ 7,988 crore for the quarter ended December from ₹ 7,234 crore a year earlier. Revenues, however, grew 9.3% to ₹ 10,620 crore from ₹ 9752 crore in the same period due to improvement in subscriber mix, tariff intervention and 4G subscriber additions.

The Aditya Birla Group-promoted company reported an average revenue per user of ₹ 135, higher by 3.3% from ₹ 131 in the previous quarter. Arpu is the key profitability parameter for telecom service providers. However, its Arpu is the lowest among peers, with Airtel leading the pack at ₹ 193 per month.