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Vodafone Idea Ltd chairman Kumar Mangalam Birla.mint
Vodafone Idea Ltd chairman Kumar Mangalam Birla.mint

‘Growth of telecom sector depends on higher tariffs’

Tariffs in the sector are very low, making pricing revival crucial over the long-run, says Vodafone Idea chairman Kumar Mangalam Birla

The growth of India’s telecom sector depends on higher tariffs, Vodafone Idea Ltd (Vi) chairman Kumar Mangalam Birla reiterated on Wednesday at the telco’s annual general meeting.

Tariffs remain extremely low despite the hike in December 2019, Birla said.

“Tariffs are still very low, and therefore, pricing revival is critical for the long-term growth of the sector," he said.

Birla’s comments come amid the company’s fundraising plans even as it faces financial stress and needs ample cash flow to help it keep going in a hyper-competitive telecom market.

The Supreme Court, in a judgment on 1 September, allowed telcos to pay adjusted gross revenue (AGR)-related dues in 10 years, following which the board of Vodafone Idea approved raising up to 25,000 crore via equity and debt, with a limit of 15,000 crore on either route.

Earlier this month, the company rebranded itself as Vi, creating a unified identity, two years after the merger of erstwhile Vodafone India Ltd and Idea Cellular Ltd. The company termed the rebranding as the final step towards integrating the two brands, which have had vastly different appeals among customer segments.

The company also launched GIGAnet, the largest network integration done through a spectrum re-farming exercise, to enhance its data traffic management as the operator seeks to rebuild subscriber trust through its network offerings.

On 27 September, Vodafone Idea said it will upgrade its 3G customers across all markets to a 4G network in a phased manner to provide faster data speeds and services using Vi GIGAnet technology.

“Your company continues to focus on driving 4G penetration to increase average revenue per user (Arpu). Further, your company remains focused on strengthening its position on enterprise services, especially the new and fast-growing segment of Internet of Things and cloud services," Birla said.

All these initiatives will improve revenue and profitability, and subsequently strengthen the company’s overall competitive position in the market, he said.

Vodafone and Idea have had independent engagements with the Indian Premier League (IPL) cricket tournament in the past but, this year, the company inked its first sponsorship deal under the unified brand.

Vodafone Idea has the weakest balance sheet among the top three telecom players in India. In the June quarter, Vodafone Idea suffered a loss of 25,460 crore because of exceptional costs, including AGR provisions.

The telco needs fresh equity, higher tariff and concession in various government levies to continue operations besides paying the annual instalment of AGR dues, according to telecom experts. Vodafone Idea owes the government more than 50,000 crore in AGR dues.

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