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Vodafone Essar’s ARPU Drops To Rs.191, Rev Up 26.4% YoY

New telcos may have wooed many customers to defect to their side, but Vodafone Essar claims they are returning to its network after using promotional plans offered by new operators. Yet, the operator has added fewer connections in the June quarter – 8.2 million compared to 9.5 million in the March 2010 quarter. It now has 109.06 million connections, of which 94.7% are prepaid connections.

The other highlight of the quarter was an anniversary of sorts – it has been one year since the price war began in April 2009 and there have been no major slashes of call rates since then, which has helped the company surface in the region. India is now cash positive at an operating level, Vittorio Colao, Chief Executive of Vodafone has said.

On the earnings call, he added that organic service revenue in APAC and Middle East region grew by 10.5% in the quarter, primarily because none of the main operators have made major price reductions after the “big one of last year” in India.

ARPU Down To Rs.191, Revenues Up 26.4% YoY

Competitor Idea Cellular recorded an ARPU of Rs. 182 this quarter, and Vodafone Essar’s is now at Rs. 191, a reduction of Rs. 56 from the same quarter last year.

Details: Financials | Release | Presentation | Earnings Call Webcast

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Voice/mobile revenue is up 12% sequentially and 22.6% year on year to GBP 772 million, while messaging revenue has shot up 77.3% year on year to GBP 39 million. Data revenues soared 25% this quarter to GBP 55 million.

Vodafone Essar recorded revenues of GBP 954 million, sequentially up 13.2% and up 26.4% year on year – information on profits has not been disclosed. Comparatively, Idea Cellular’s revenues were up 9.1% from the previous quarter and 22.8% yearly.

KPIs

The operator recorded 103.2 million voice minutes on network compared to the 93.73 million in the previous quarter. This refers to the total volume of incoming, outgoing and visitor calls on the Vodafone Essar network. India’s contribution to APAC & Middle East organic service revenue growth is around 80%.

Annual churn remains stable at 38.8% for India, with post paid churn slightly lower at 24.8%. Vodafone Essar expects a slowdown in price decline as it now has over 90% of its customer base on the new tariffs.

3G Spend, Launch In Q4

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Vodafone Essar invested a total of £3 billion in spectrum licences in India and Germany, of which £1.74 billion or Rs. 116.2 billion was for 20-year, 3G licences in India. The operator bagged 2×5 MHz of 3G spectrum in nine circles including Delhi, Mumbai, Kolkata, three ‘A’ circles and three ‘B’ circles which are expected to reach 66% of Vodafone’s current footprint.

Vodafone Essar will launch 3G services in the fourth quarter of fiscal year 2011.

Minority Stake Sale In Bharti Airtel

Unconfirmed news reports that the group company Vodafone Plc might strategically sell a 4.39% indirect stake it owns in Bharti Airtel are doing the rounds. The company CEO Colao said recently that minority investments were not its core assets and he was not keen on holding onto the stake, but there was no mention of this in the quarterly earnings webcast.

Vodafone Group acquired 10% stake in Airtel in 2005 for $1.5 billion, but sold off 5.61%. Now its stake in Airtel is worth Rs. 5.2 billion, reports Business Standard.

Tax Case: Hearing On August 2

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In October 2009, the Indian Tax authorities had demanded tax worth GBP 1.21 billion on the telecom companies acquisition of Hutchison Essar in 2007 for GBP 6.78 billion. Vodafone International Holdings BV has filed a writ in the Bombay High Court challenging the Indian tax authorities’ attempt to recover tax from VIHBV on the Hutchison transaction of 2007.

After UK prime minister Gordon Brown wrote, on behalf of Vodafone, to our prime minister Manmohan Singh, it appears that the long dragging case will finally be resolved. It is scheduled to be heard next week – on August 2, 2010.

Essar’s Put Option: Adjustment

Vodafone has increased the value of its put arrangements with the Essar group, adding the upfront cost of 3G licences to the tune of Rs. 34 billion (£510 million). This will be payable in the event that the Essar group exercises its put option to sell some or all of its Vodafone Essar Limited shares at fair market value.

For our earnings coverage for the quarter, click here.

Related

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– Vodafone-Essar CEO Marten Pieters On M&A In The Indian Telecom Sector
– Vodafone Launches Mobile Application Store; IPL Tickets
– Vodafone Essar’s ARPU At Rs.209, Rev Up 9.1%

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http://www.linkedin.com/in/preethij

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