AGR order a 'good outcome', expect support from promoters in the future, says Voda Idea CEO

Takkar also said that Rs 25,000 crore which the telecom carrier plans to raise is sufficient “for our business plan which we have submitted to our board and which they have approved and we look forward to exploring all options as a company.”

Mumbai: Vodafone Idea Ltd (VIL) CEO Ravinder Takkar said the company has a “business plan” to arrest market share losses and expects continued support from promoters Vodafone Group and the Aditya Birla Group as it looks to turn around operations and take on rivals Reliance Jio Infocomm and Bharti Airtel.

The Supreme Court’s order allowing telcos, including VIL, to pay their balance adjusted gross revenue (AGR) dues over 10 years was a “good outcome,” given that the first instalment falls due only in March 2022, Takkar said at the launch of unified brand Vi. The rebranding marks the completion of the integration between Vodafone India and Idea Cellular, which merged in 2018 to form VIL. He added that the telco, which faced over Rs 58,000 crore in total AGR dues, had already paid 10% of it, or over Rs 7,800 crore, upfront, as required by the order.

Mobile phone tariffs should go up and the telco, which needs average revenue per user (ARPU) to double from current Rs 114 levels to improve its financial position, is ready to take the “first step,” he said, signalling an imminent rise in prices in the telecom sector. The loss-making telco, which recently announced a Rs 25,000-crore fundraising plan via equity and debt, needs money not just for the AGR payments – estimated at over Rs 7,000 crore annually – but also to invest in its networks to stem subscriber and revenue market share (RMS) losses.

“All the stakeholders as well as our employees and our partners have to have a win-win out of this and I think Vi has a plan that will allow for all of us to benefit from this all together,” Takkar said in his first media briefing since taking over from Balesh Sharma in August 2019.

Vodafone India and Idea Cellular merged on August 31, 2018, emerging as the No. 1 player by user and revenue market share (RMS) at the time. But the entity hasn’t been profitable and has burnt cash while slipping to third by both parameters. Its subscriber base fell to less than 280 million at the end of June from 408 million at the time of the merger and so did its RMS – to 23% compared with Jio’s 42% and Airtel’s 35%.

Takkar said Rs 25,000 crore is a “sufficient amount of money for our business plan” to put the company’s operations back on track.

When asked about funding support from promoters, especially after Vodafone Group reiterated that it won’t put in any fresh equity, Takkar said, “We have support from both the promoters. They continue to, all the time I must say, give us support. We have no reason to believe that any of that support is going to change or come down in the near future or ever at all.” But any query on equity infusion needed to be answered by the promoters, he said.

The Aditya Birla Group (ABG), which had also said previously that it won’t be putting in any fresh equity, has not clarified its stance on the matter after the AGR ruling. It didn’t respond to ET’s query on the matter.

ABG Group and Vodafone Idea chairman Kumar Mangalam Birla, however, expressed his backing for the venture. “With our new brand - Vi, we stand committed to partner the government to accelerate India’s progression towards a digital economy,” he said in a release.

Vodafone Group CEO Nick Read said the unified brand marked a new beginning. “As the integration of the two businesses is now complete, it’s time for a fresh start,” said Read.

The Vodafone Idea stock closed 2.4% higher at Rs 12.30 on the BSE Monday.

The rebranding move will lead to cost savings, said Kavita Nair, chief digital transformation and brand officer, Vodafone Idea. The erstwhile Idea Cellular had greater rural reach, while Vodafone was popular in urban areas.

Analysts said the rebranding needs to be backed up by investment in networks to be competitive and tariffs will need to be raised.

“Since the merger, we have taken steps to raise prices ... and those were followed by other industry players as well. So, we believe that prices need to go up. We are not shy to take that step,” said Takkar, adding that consumers are willing to pay more. “And the fact that other industry players are saying the same thing, I think we are headed to price increases which are much needed in the industry.”

Price hikes are needed for a “challenged” industry, where “to some extent every player is selling below cost”, he said. “We believe tariffs have to go up at least in the short term... getting them in the first steps up to Rs 200 (ARPU) is an important step and eventually the Rs 300 range.”

Brand experts said the new identity may not yield immediate results. “Both Idea and Vodafone have strong customer pull and this change will completely destroy the brand equity built over the years. However, this step is taken to connect with the new broadband and digital customers in the post Covid-scenario, who need quick recognition,” said brand expert Harish Bijoor.




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