Revival in tariffs is key: Kumar Mangalam Birla

Vodafone Idea chairman Kumar Mangalam Birla has said tariffs in the telecom sector are very low despite the hike in 2019, and pricing revival is critical for the growth of the industry.

In a letter to shareholders in the annual report of Vodafone Idea released today, Birla said through FY20, the operating environment continued to remain challenging due to unsustainable pricing and hyper competition.

“The telecom industry also witnessed the first round of tariff hike by all operators in December 2019. However, tariffs are still very low and therefore pricing revival is critical for the long-term growth of the sector,” he said.

Birla's statement was in sync with Bharti Airtel chairman Sunil Bharti Mittal's message to shareholders in the Airtel annual report stating that India still has some of the lowest data tariffs globally and the industry is barely able to cover the cost of capital.

The verdict on the long pending industry issue of adjusted gross revenue (AGR) also added to the financial woes of telecom operators, Birla said. The Department of Telecom (DoT) has intervened to restore the financial health of all operators by way of a two-year moratorium on spectrum payments, he added.

“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 IoT and cloud services. All these initiatives will improve revenue and profitability and subsequently strengthen your Company’s overall competitive position in the market,” he told shareholders.

After the top court allowed telcos to pay adjusted gross revenues-related dues across 10 years, the Vodafone Idea board on Friday approved raising up to ₹25,000 crore via equity and debt, with a limit of ₹15,000 crore through either route.

The proposed fundraising is subject to regulatory and shareholders’ approvals. Vodafone Idea will take up the proposal at its annual general meeting on 30 September. If the firm raises ₹15,000 crore via equity, it would be about 44% of its market value of ₹34,511 crore—leading to a stake dilution for UK’s Vodafone Group Plc, which holds around 43%, and the Aditya Birla group, which holds 29%.

The Vodafone Idea annual report reiterated the telco's focus on the rural and new-to-internet population. The overall tele-density in India stood at 85.87% as of March, suggesting there is still a proportion of population that is yet to start using mobility services.

“This holds true especially for rural areas where tele-density is still low at 58.5%. If we consider the active subscriber base of 989.1 Million (March 2020), the penetration is still around 73.4% indicating a large population base which is yet to adopt mobile telephony services, a clear long term opportunity for the mobile operators,” said the report.

The company said, as part of its strategic ‘Smartphone for All’ programme, it has partnered with NBFC, Home Credit India Ltd, for a ‘handset & telco recharge’ which is made available as an integrated bundle on loan – an industry first. This proposition was primarily based on identification of the ‘new to credit’ customers within their own base, with the help of big data analytics, to target the customers. Customer walking into over 25,000 retail offline stores across the country could buy a 4G smartphone on EMI along with a six-month unlimited prepaid plan.

The operator has also partnered with device manufacturers like Samsung and Vivo for the launch of their flagship products with joint advertising, with the objective of gaining a higher share of incremental high end customers.

The telco has also deepened its partnerships with popular digital wallets PayTM, PhonePe and Amazon Pay for cashback offers, making its plans more affordable and convenient to recharge, the report said.

Vodafone Idea Ltd on Monday launched an integrated brand called VI, two years after the completion of Vodafone India Ltd and Idea Cellular Ltd merger.