Vodafone Idea’s revenue for Q1FY20 stood at ₹11,775 crore — a 4.3% decrease from the last quarter, Q4FY19. The company’s revenue was less than Bharti Airtel’s (₹15,345 crore) and slightly more than Reliance Jio’s (₹11,679 crore) in the first quarter of FY2020. The telecom operator saw a marginal decline in net losses — ₹4,873.9 crore in this quarter, compared to ₹4,881.9 in Q4FY19.
Performance Metrics
- Total subscriber base (2G+3G+4G) declined to 320.0 million from 334.1 million in Q4FY19.
- ARPU now stands at ₹108, up 3.8% quarter-on-quarter vs ₹104 in Q4FY19. This is less than the ARPU of both Bharti Airtel (₹129) and Reliance Jio (₹122).
- The company added 4.1 million 4G subscribers taking its overall 4G base to 84.8 million subscribers at the end of the June quarter.
- Total minutes on the network declined by 3.8% during the quarter.
- Data volumes grew by 9.3% to 3,222 billion MB compared in the last quarter.
- Broadband subscriber base for the quarter stands at 110.5 million.
Scoop on Vodafone Idea
In the investors’ call, Vodafone Idea’s (now former) CEO Balesh Sharma, and CFO Akshaya Moondra talked about the company’s falling revenues, reasons behind a depleting subscriber base, shutting down of Aditya Birla Idea Payments Bank, content partnerships and more:
Reason(s) behind the fall in revenue this quarter: Two major reasons according to Sharma:
- “Churn of customers on minimum ARPU plans and the down trading of high ARPU customers led to the revenue decline of 4.3% this quarter.” — Sharma
Is Vodafone Idea cash strapped and needs additional funding? No, said Moondra.
- “I don’t think over the time frame that you are talking about, we will need additional funding as we have always mentioned in the past.” — Moondra
[NB: The company is exploring options to monetise about 159,000 km of intra-city and intercity fibre, according to information in the investors’ call.]
How is Vodafone Idea trying to protect its eroding user base? They’ve taken a two-way approach: Cheaper plans that offer more and hyper local promotional campaigns.
- Cheap plans that offer more: “We have taken several market initiatives offering higher value proposition to low ARPU segments to arrest churn. What we are realizing is that these customers recharge with Rs. 35 or one of these vouchers once, second time or third time and then start looking for better value somewhere else. For answering such needs we have come up with a voucher of Rs. 45, which we have tested in four markets. This approach offers full talk time for the customer at 1 paisa per second, which means the customer has to use the benefits within the 28 days and gets a much better value than Rs. 35 at just a marginal increase of Rs. 10.” — Sharma
- Hyper-local marketing: “To improve customer perception, we are now running several hyper local promotional campaigns targeting specific cities and districts to advertise our improvement in network experience and to improve customer awareness about our brands and network. We are confident that this would lead to better subscriber additions over time.” — Sharma
Why this matters: As discussed earlier, Vodafone Idea’s revenue figures for the June quarter are less than Bharti Airtel’s and little more than Reliance Jio. It is also behind these two telcos in terms of revenue market share according to a TRAI report. Also, according to a Mint report, an analysis of Vodafone Idea’s debt and repayment schedules shows that the company might fall short of funds in the next year.
There’s another side to the depleting user base: Mostly users who spend less on voice and data packs left Vodafone Idea, according to Sharma. There was downtrading from users who usually paid more for plans. Sharma explained:
- “We have seen some down trading of high ARPU customers primarily as the customers moved from unlimited voice and data plans priced at Rs. 169+ to unlimited voice and fixed data plans which are priced lower at Rs. 119 or Rs. 129, as the primary needs for this customer was voice.” — Sharma
Why did Aditya Birla Idea Payments Bank shut down? “Regulations relating to payments banks” and “the general health of the telecom industry” were the major reason behind shutting down ABIPBL, said Sharma.
- “The continuing losses, absence of long-term business case and holistic evaluation of the situation led to the decision of winding up of these businesses.” — Sharma
So, is that the end of the road for Vodafone Idea in the payments space? No, according to Sharma. The way forward is “partnerships” with fintech companies.
- “Now that we are proposing to not have the payments bank as well as the M-Pesa business we will not have the baggage of having our own company, and instead explore the marketplace, and we are already doing that to partner with fintech companies whose products we can distribute henceforth.” — Sharma
Content partnerships with the “best in class”: Netflix, Amazon Prime, Sony, Zee, Eros, Sun. Shemaroo, Hoichi, TV Today, and Discovery are some of the platforms that Vodafone Idea has content partnerships with, Sharma said, before adding, “On content we will continue partnering with the best in class”.
- “As a result, we have witnessed, in the last quarter alone, 27% increase in our average viewers and 23% increase in the minutes of viewership.” — Sharma
What happened to Vodafone’s music streaming service? It is a work in progress, Sharma said.
- “Our partnership on music streaming services, while it has taken longer than we expected it to launch, it is in progress and we will keep you posted on the same.” — Sharma
Is the company gearing up for 5G’s onset in India? Seems like it. The company has deployed over 6,700 Massive MIMO (multiple-input and multiple-output), which is a 5G technology, said Sharma.
- “This is a second largest deployment of this technology in the world and makes us unique in this country. We are the only telco which is doing serious level of deployment of Massive MIMO technology. This means with Massive MIMO deployment in our high-priority districts and hot-spots, our capacities and hence customer experience will stand out.” — Sharma
The money it has to pay the govt: “On the DoT installments for the remaining part of the financial year, the installment due including the interest component is Rs. 57 billion. In the next financial year, the annual installment on a continuing basis is about Rs. 120 billion,” Sharma said.
Download: Financials | Investors Call Transcript
