Home / Markets / Mark To Market /  Vodafone Idea CEO Sharma’s exit comes amid high subscriber churn

Mumbai: The exit of Vodafone Idea Ltd’s chief executive officer (CEO), Balesh Sharma, comes at a time of high subscriber churn at the company, leaving the task cut out for Ravinder Takkar, Vodafone Group’s India representative, who takes over from him.

The top priority for Takkar should be to improve execution. June subscriber data from the Telecom Regulatory Authority of India shows that Vodafone Idea continues to lose subscribers at a brisk pace. It lost 4.1 million subscribers in June, while rival Bharti Airtel Ltd maintained its subscriber share. Vodafone Idea’s subscriber market share has dropped from 38.4% in July 2018 to 32.9% in June this year.

The delay in integrating the sales and marketing teams of Vodafone and Idea after the merger has cost the company dearly. Vodafone Idea’s difficult-to-explain poor reading of consumer behaviour is a company-specific issue that has contributed to its decline, according to analysts at Kotak Institutional Equities.

“In a market where Reliance Jio is the player shaping consumer behaviour in the smartphone segment (the high end of the market), Vodafone Idea’s poor reading of consumer behaviour at the low end of the market, its stronghold, was disappointing," they wrote in a results review note to clients.

Vodafone Idea has been busy integrating its networks, but the company has not spent nearly as much as it should have 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 the network expansion pace while ensuring seamless integration at the same time," said the Kotak analysts.

The silver lining is that Vodafone Idea appears to have stopped losing its higher-revenue wireless broadband subscribers and has added 1.5 million of them in June. However, the pace of additions is too low for comfort. Bharti Airtel added 3.1 million subscribers in June and has slightly improved its market share. As such, Vodafone Idea continues to lose market share even among wireless broadband subscribers.

“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 Securities Ltd said in a note to clients.

Needless to say, Vodafone Idea is in a far more precarious position than Bharti Airtel. The new CEO has no choice but to hit the ground running, in view of the company’s fast depleting cash position. Vodafone Idea’s funds may suffice for only four-five quarters given its current cash burn rate, as pointed out in this column earlier.

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