Customers consuming more should pay more, users loss to BSNL reversing quickly: Vi official

Making a pitch for further tariff hikes, a senior Vodafone Idea official on Thursday said telecom subscribers consuming more data should pay more to enable the industry to generate reasonable returns and ensure connectivity to all sections of society. During Vodafone Idea (VIL) earning call for the second quarter ended September 30, 2024, the company's CEO Akshaya Moondra said that the loss of subscribers to BSNL due to the recent tariff hike is quickly reversing because of the state-run telecom firm's "network experience".

VIL has announced a total investment of Rs 55,000 crore in the network over a period of next three years. In September, the company roped in Nokia, Ericsson, Samsung for network expansion with an outlay of Rs 30,000 crore over a period of next three years. The loss-making firm is in discussion with banks and financial institutions to raise around 25,000 crore but the process has slowed down for lack of clarity on relief sought by the company on Rs 70,320 crore adjusted gross revenue (AGR) liability. VIL has asked the government to waive Rs 24,746.9 crore bank guarantee (BG) that it is required to submit 13 months in advance of spectrum payments due between October 2025 and September 2026 Moondra said that the BG will impact the company's ability to seek debt facilities from the banks which the firm requires for investment in networks.

He said that large investments are required to support the emergence of new technology and explosive data growth and at the same time affordability of tariffs have to be maintained to ensure connectivity to all sections of society. "This is possible when customers who are using more will pay more to enable the industry to generate reasonable return on capital on the large investment that has been made. Hence, further tariff rationalisation is needed for the industry to recover its cost of capital," Moondra said. The debt-ridden telecom firm has reported a narrowing of its consolidated to Rs 7,175.9 crore in the September quarter mainly on account of increase in average revenue per user (ARPU) post-tariff hike in July.

The company's mobile customer ARPU, excluding those of machine-to-machine, increased 7.8 per cent to Rs 166 on a quarter-over-quarter basis from Rs 154 in the April-June period but still continues to be lower than that of its competitors Reliance Jio and Airtel. Though the tariff hike resulted in the company losing customers on a quarterly basis, Vodafone Idea CEO Akshya Moondra still indicated the need for another hike to cover the cost of capital. After the tariff hike, all three private operators Reliance Jio, Bharti Airtel and Vodafone Idea lost a significant number of subscribers to BSNL that largely provides 3G service and 4G in select telecom circles.

VIL's overall subscriber base declined to 20.5 crore from 21 crore and 4G subscriber base to 12.59 crore from 12.67 crore on a quarter-on-quarter basis. He said that the September quarter is a weak quarter for subscriber growth which has in turn added to the decline. "However, the impact of BSNL has been there in this quarter, we have seen that impact reversing quite quickly, from August to September to September to October, and October to November," Moondra said. He said that in some manner VIL is inching towards the position which was there before the tariff hike but some loss which has happened during the quarter will still take some time to unwind. "We believe it will happen based on the customer experience because there is definitely a differential in experience for a customer who is a high user of either data or voice," Moondra said. BSNL has plans to roll out 4G services across India by mid of next year.

While the current capex plan of VIL is supported by Rs 24,000 crore fundraise through the sale of equity, comprising Rs 18,000 crore from follow-on offer, the company is in discussion with banks and financial institutions to raise Rs 25,000 crore that it will further invest in the networks. "We are seeking a certain facility from the bank. The bank guarantee facility will kind of reduce our ability to get that funding. It is very clear that bank guarantee is something which the banks themselves will not be very willing to offer. They are fine for debt funding which will go towards making investments, which will kind of help in improving our performance and then improving our cash generation," Moondra said. He said that the AGR relief matter has never been part of the company's business plan but banks being lenders want clarity on the matter.

"I must clarify what I had done in my earlier call, also that any reduction in the AGR liability was not a part of our business plan, submitted to the banks. I think as any interested party, the lenders are also looking at what is happening on the AGR matter. Although it was not a part of our business. We are engaged. I think we should be able to close once some clarity emerges as to what is happening on the AGR," Moondra said. VIL had recorded total debt of over Rs 2,22,470 crore at the end of September 2024 quarter comprising Rs 3,271 crore due to be paid to banks and financial institutions and Rs 2,12,260 crore government dues.
The company expects that in case of cash shortfall, the amount due to the government can be converted into equity.

 

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