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Earnings Call: Vodafone Idea to launch 5G within 6-7 months of receiving funding

Days before the earnings, the DoT sent the company a show-cause notice seeking an explanation as to why fines should not levied on them for failing to meet the minimum rollout.

“We are in discussion with various technology partners for finalization of our 5G rollout strategy, as well as working with many partners to develop use cases relevant to the Indian market and have partnered with leading handset manufacturers to test their extensive 5G smartphone portfolio on our 5G network,” Vodafone Idea’s (Vi) CEO Akshaya Moondra said during the company’s earnings call for the third quarter of 2024 (Q3FY24) last month. Based on Moondra’s comments during the call, the company is looking to launch 5G within 6-7 months of receiving funding.

Interestingly, up until last quarter, Moondra had said that Vi hadn’t seen a significant impact of not providing 5G services. However, days before the earnings, the Department of Telecommunications had sent the company a show-cause notice seeking an explanation as to why fines should not levied on them for failing to meet the minimum rollout, according to an ET report.

Vi’s 5G deployment plans: “I think we will at least have the benefit of seeing what is the 5G adoption happening,” Moondra said when asked how the company sees its 5G deployment plan. He mentioned that the biggest challenge to 5G is that there is no monetization. “In fact, the way 5G is priced today is actually resulting in discounting of 4G also, because whatever is being used on 5G is not counted at all,” he said.

He added that by the time Vi launched its 5G network, it will have some clarity on how monetization is going to work on 5G. “Because having made such large investments and no monetization happening, I think the industry does need to see some movement towards monetization,” Moondra said.

Expanding the 4G base by shutting down 3G: Vi is working on upgrading its non-4G sites to 4G via spectrum refarming. As of December 2023, the company has shut down 3G services in five circles Gujarat, Andhra Pradesh, Maharashtra, Mumbai, and Kolkata by refarming the spectrum in these circles to 4G. During the call, Vi’s CEO Akashaya Moondra explained that the company’s network investments have been impacted on account of liquidity constraints and that refarming existing spectrum has helped Vi utilize its capital expenditure effectively.

“Fundamentally, as of today, let’s say, given a choice, we would want to shut down all the 3G sites and use the spectrum for 4G, which provides better capacity, better experience, and of course, reduces, eliminates one technology from a site, which is generally an optimum way to operate,” Moondra said, explaining the company’s stance on 3G. He added that he expects Vi to be able to close down its entire 3G network by the next financial year as the number of handsets on the network come down further.

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On the reduced subscriber count: Vi lost 4.6 million subscribers in the third quarter of the financial year 2024 (Q3FY24) going from 219.8 million subscribers in the last quarter to 215.2 million this quarter. Moondra explained that there were two key reasons behind the reduced subscriber count— first, last quarter, the company had tied up with the Indira Gandhi smartphone Yojna and that had helped the company reduce its decline in subscribers last quarter, making the decline seem more prominent in Q3FY24. Second, Vi has increased the cost of its entry-level plans, which, while resulting in a rise in revenue also caused a one-time drop in subscriber numbers. “If I take those two factors into account, our churn or our net decline in subscribers is more or less in line with what we saw in Q1,” Moondra said. The company had 221.4 million subscribers in Q1FY24.

New offerings launched this quarter: The company launched a shop section on the Vi app this quarter.  It also began providing flight booking facilities through the Vi app in partnership with EaseMyTrip. “We will soon be adding hotel, train, and bus bookings. We have a clear roadmap to scale each of these streams, and that’s going to be our focus in the coming quarters,” Moondra explained.

Moondra also mentioned that the company has developed TV apps for Vi Movies and TV which will be compatible with multiple operating systems including Android, Google TV and Fire TV Stick. These are yet to be launched to customers.

On the decline in data traffic: A participant pointed out that Vi has experienced a 2% decline in data traffic and asked Moondra why the company is seeing a decline despite other two major players in the industry (Airtel and Jio) seeing traffic growth. Moondra said that the company had seen a 2% positive growth in the last quarter and this percent it had seen a 2% decline, so the change in growth rate is about 4%. “You would see the same trend in the other set of results which have been declared where the growth has declined. The percentage of growth declined by about the same level of 4%. So it is not specific to us,” he said, explaining that changes in growth were an industry trend.

Moondra pointed out that the company was surprised to see this decline in a quarter where the Cricket World Cup took place. He said that based on the trend the company could observe— first,  a lot of over-the-top consumption (streaming) happens on mobile, and second, the Indian matches were happening over the weekend. As such, these matches were being consumed over cable TV where the time lag for telecast is minimum. While this was a potential reason, the complete explanation is not available, Moondra explained. He compared the World Cup to the Indian Premier League (IPL) and said that while the IPL sees a fairly long period of increased data consumption, consumer behavior has been different during the World Cup.

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