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    Vodafone Idea looking to expand 4G to address subscriber loss: Earnings Call

    Vodafone Idea (Vi) continued to lose subscribers in the fourth quarter of the financial year 2024, reducing to 212.6 million subscribers from the last quarter’s 215.2 million. This continues a trend with the number of subscribers in Q4FY23  being 225.9. The company has been observing a loss in subscribers for the past eight quarters.

    The company plans to address this loss in subscribers by investing the Rs. 180 billion raised in its Follow-on Public Offering (FPO) into replacing their 3G coverage with 4G. Akshaya Moondra, CEO of Vodafone Idea Limited said, “I would say that our topmost priority is 4G coverage because that is, to my mind, the only reason why we continue to lose subscribers. And so we have to expand our 4G coverage, that capex will be fairly accelerated.”

    The Average Revenue Per User (ARPU) improved to Rs. 146, up 7.6% on a Year-On-Year (YoY) basis, versus Rs. 135 in Q4FY23. Vodafone Idea attributed this growth to a change in entry-level plan and subscriber upgrades.

    Data consumption patterns in Q4FY24:

    The number of 4G subscribers saw a slight increase this quarter growing from 125.6 million in Q3 to 126.3 million in Q4. There was also an increase in subscribers annually, with number of 4G subscribers being 122.6 million in Q4FY23. The total data subscriber base, however, saw a slight decline, going from 137.4 million in the last quarter to 137.3 million in Q4. The total data volume saw an increase from 6,004 billion MB in Q3FY24 to 6,049 billion MB in Q4. This is a significant increase from the corresponding quarter of the previous year i.e. Q4FY23 which was 5,802 billion MB. The total data traffic for the quarter witnessed a YoY growth of 4.3%.

    What are the plans to address loss in the subscriber base?

    Expanding the 4G base by shutting down 3G

    Expanding the 4G base by shutting down 3G is key to Vodafone’s strategy to address subscriber loss. During the earnings call, Moondra said, “The only reason why we continue to lose subscribers largely or disproportionate to the others is because of lack of 4G coverage.” 3G was replaced with 4G in 6 areas, with Kerala being the latest addition to Maharashtra, Gujarat, Andhra Pradesh, Mumbai and Kolkata.

    Vi’s 5G deployment plans

    Vodafone Idea also aims to expand its 5G rollout to address the increasing data demand, saying, “We will be well placed to effectively utilize our capex spend as we will be able to address a part of the capacity requirements via 5g instead of 4g.” They have completed minimum rollout obligations for 5g in Maharashtra, Delhi, Tamil Nadu and Punjab and applied for completion certificates in Bihar and Mumbai.

    New offerings launched this quarter

    Vi App has enabled e-commerce via Vi Shops. Further, it has introduced a mobile cloud gaming service called Cloud Play, in partnership with CareGame.

    Switching to pricing based on usage

    When asked if Vodafone Idea wished to move to a system where users were charged according to their amount of usage rather than fixed packages for data, Moondra said, “Today the situation has been that it has been so cheap and so unlimited. There’s a lot of consumption which is avoidable consumption.” He said that if prices were increased, customers would find that they would be able to manage their data needs with lesser consumption.

    Thus, he called for pricing products according to usage as opposed to the current model of packages providing large amounts of data at a cheap price.

     “If somebody is using very high and paying very low today, ultimately we have to say that “if you use more, you pay more” and we have to move into that direction.” Further, he added, “That’s the right structure over the long term for the industry to price its products. I don’t think the kind of pricing we have in telecom exists anywhere in the world today, or even in other industries which are offering services which come with that.”

    He also cited pricing products differently to address rotational churn in users. “I would think that as industry now gradually moves to a direction of getting the right price and not so much focused on just getting market share, if all industry players start exercising some discipline and making their offers less aggressive, it [churn] should correct by itself,” he said.

    Airtel brought up a similar point in its earnings call for this quarter. Bharti Airtel’s Managing Director Gopal Vittal called India’s payment system for data “quite broken” because people who can afford to pay a lot more are paying less simply because of unlimited plans.
    He also brought up the fact that while in other Asian markets like Indonesia and Thailand, users can find various levels of data plans like small, medium and large and have a “pathway to upgradation”, that is not the case in India. Thus, he called for change in the system and said that Airtel would follow anyone willing to take the lead on this change.


    Financial performance this quarter:

    Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) for the quarter grew by 3.0% on YoY basis from Rs. 42.1 billion in Q4FY23 to Rs. 43.4 billion. EBITDA margin for the quarter was 40.9%. On a quarterly basis, the EBITDA saw a slight decrease going from Rs. 43,504 million in Q3 to Rs. 43,358 million. Profit after Tax continued to see a steep decline in this quarter going from a loss of Rs. 69,859 million in the previous quarter to a loss of  Rs.76,746 million in this quarter. This decline in Profit After Tax continues to be a trend, with the company observing a loss of 64,189 million in Q4FY23.

    Government liability

    Vodafone Idea’s payment obligations to the Government stood at Rs. 2,034.3 billion as of March 31, 2024. This included the deferred spectrum payment obligations of Rs. 1,331.1 billion imposed by the Telecom Regulatory Authority of India (TRAI) for failing to comply with the Telecom Commercial Communications Customer Preference Regulations (TCCCPR), which requires Vi and other telcos to curb unsolicited commercial communications (UCC) or spam on their services.

    Vi also has an Adjusted Gross Revenue (AGR) liability of Rs. 703.2 billion that is paid by telcos in exchange for a license to operate telecommunication services in the country.

    On the company’s earnings call, it stated that it had filed a curative petition calling for a waiver in penalty and said, “The last judgment on the matter was at the tribunal where it was largely divided, decided in favor of the industry. So in our judgment, the penalty could also be taken off.”

    Fundraising

    Aside from raising Rs. 180 billion in its FPO,  in May 2024, Vi saw an equity infusion of Rs. 20.75 billion on preferential basis, from an Aditya Birla Group (ABG) entity and preferential equity raise of Rs. 49.4 billion in 2022 from Vodafone Group and ABG, taking the total fund infusion to ~Rs. 70 billion. Additionally, the company is in discussions with a consortium of banks to raise up to Rs. 250 billion and additional non-fund based facilities of up to Rs. 100 billion. This, the company said, would be used for increasing its 4G and 5G coverage.


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