Voda-Idea hangs up on low spenders
NEW DELHI: Vodafone Idea Ltd is gearing up to fight rivals Bharti Airtel Ltd and Reliance Jio Infocomm Ltd with an aggressive expansion of its network of fourth-generation (4G) mobile tower sites and segmenting its markets into four categories on the basis of leadership and profitability with a specific strategy for each, said a person aware of the plans.
India’s largest telecom operator by users also plans to raise minimum recharge tariffs to improve profitability and has advanced an ongoing synergy target of ₹14,000 crore by two years to 2020-21. The target includes saving ₹8,400 crore in operational expenditure and ₹5,600 crore in capital expenditure, said the person, who declined to be named.
Vodafone Idea’s growth strategy and its future plans were discussed at a meeting between its management and telecom analysts in Mumbai on Wednesday.
The loss-making company told analysts that it would continue to operate both brands, Vodafone and Idea, and “that there will be a price repair (tariff hike), which will be very significant as the company’s negative free cash situation makes the price repair imminent”, said the person cited earlier, who was present at the meeting.
Vodafone Idea plans to augment its 4G coverage from the current 50% to cover 70% of the country over the next six months, and 80% in 2019-20, said the person. The step is expected to help close the 4G coverage gap with rivals, who have so far outpaced Vodafone Idea on this metric.
“We are expanding our 4G coverage nationally to cover a billion Indians. We are executing a plan that enhances the services available to customers of both brands,” a spokesperson for Vodafone Idea said in response to a query seeking comment.
The company is meanwhile awaiting realization of merger synergies as a result of integrating the spectrum assets and the networks of both Vodafone and Idea.
Triggered by intense competition in the sector following the entry of Reliance Jio in September 2016, the merger of Vodafone India with Idea Cellular, first announced by the companies in March 2017, was completed on August 31.
In its first financial results as a merged entity for the September quarter, the company reported a loss of ₹4,970 crore. Vodafone Idea said customer migration to lower average revenue per user (ARPU) offerings led to a 4.7% quarterly decline in ARPU to ₹88 for the quarter. Rival Bharti Airtel’s ARPU was much higher at ₹101 while Jio’s was ₹131.7 in the same quarter.
“In order to improve profitability, the company will radically accelerate integration to reduce cost of production; prioritize investment in profitable areas and drive ARPU simplification,” the person said.