Voda-Idea sets sight on higher revenue

MUMBAI: Vodafone Idea Ltd has started an ambitious drive to expand its operating margins to as much as 40% and simultaneously raise revenue, top executives said.

The company, India’s largest telecom service provider by users, last saw such margins before the entry of Reliance Jio Infocomm Ltd sparked a tariff war. The company’s faith in its ability to improve margins and revenues stems from its assumption that there are Indian customers willing to pay more for bestin-class services.

“We had given a pro forma calculation (to analysts) where we said that if Arpu (average revenue per user) two years ago was ₹170 with 0.6 gigabytes (GB) of data and that is now going up to 6GB—10 times, definitely, the consumer is willing to pay at least what he was paying two years ago for at least 10 times the higher offering. If you do that, the margins would come to 40%, which the industry has seen in the past,” Akshaya Moondra, chief financial officer, Vodafone Idea, said at a press meet.

But that will depend on whether Jio, controlled by Mukesh Ambani, will ease up on the tariff war which it unleashed two years ago, triggering industry consolidation and a data revolution. “I can’t predict when will Jio change. We turn profitable by doing the initiatives that we are talking about—moving the revenue bar on the revenue growth story that we are talking about. Market repair has to happen because one, it is unsustainable; two, it is making India uncompetitive; three, even Jio is burning cash. So, ultimately, there has to be a rationale in doing business. With consolidation completed and with all three players being strong enough to sustain themselves, there is no motive left for anybody to reduce the size of the cake so much,” said Balesh Sharma, chief executive officer, Vodafone Idea Ltd.

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 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.

Vodafone Idea is gearing up to fight rivals Airtel and Jio with an aggressive expansion of its network of 4G mobile tower sites and segmenting its markets into four categories on the basis of leadership and profitability with a specific strategy for each.