Vodafone India strategies fail to deliver in last six months

Vodafone retail store India 2017Strategies of Vodafone India CEO Sunil Sood did not assist the telecom operator to improve revenue and growth in the country due to the growing presence of Reliance Jio and the aggressive marketing of Airtel.

Vodafone posted service revenue of INR 19,002 crore (–15.8 percent), EBITDA of INR 4,075 crore (–39.2 percent) with EBITDA margin of 21.4 percent in the first half of fiscal 2018.

Vodafone India’s service revenue dropped 15.8 percent in the first half and 13.9 percent in Q1 and 17.8 percent in Q2.

Vodafone India’s Q2 revenue drop was due to price competition, the monsoon, and the impact of the new GST.

Vodafone said there will be more pressure on its revenues in the second half due to TRAI’s decision to lower mobile termination rates from 14 paisa to 6 paisa per minute from October 2017.

Pre-paid ARPU of Vodafone India fell 23 percent in the first half because the operator offered longer validity periods of up to three months in promotional offers. Post-paid ARPU of Vodafone India fell 16 percent due to significant price declines in the pre-paid segment.

The company reported poor business performance despite slashing its voice and data tariffs to both pre-paid and post-paid customers in India. The financial result indicates that Vodafone customers in India are becoming unhappy with its service quality.

Vodafone India lost 2.7 percent of data customers. Vodafone India has 67.7 million data consumers in India. Vodafone India reported 5.9 percent drop in mobile data customers who consume 1MB and above. Vodafone has 44.6 million 1MB data consumers. The 3G and 4G customers of Vodafone increased 27.9 percent to 46 million due to a relatively low base in the first half of fiscal 2017.

The 0.5pp increase in churn, though marginal, in wireless customer base indicates the quality of its services. Vodafone India reported 0.5pp increase in churn in its contract and pre-paid wireless customers. Vodafone India total churn rate was 5.2 percent 2.1 percent coming from contract and 5.4 percent coming from pre-paid subscribers.

Vodafone India made capital investments of INR 2,915 crore (–13.1 percent) with Capex intensity of 15.3 percent in six months. Vodafone reduced its investment in India at a time when Reliance Jio started expanding its 4G presence.

“Amidst continuing intense competition, we recorded 0.6ppt gain in RMS in Q1FY18 and delivered a stable performance overall. We see signs of positive developments with consolidation of smaller operators,” said Sunil Sood, managing director and CEO, Vodafone India.

The main improvement was in the growth of wireless subscriber base despite pricing competition. Vodafone’s wireless base rose 3.3 percent to 207 million. Vodafone has a network of 140,000 sites including 128,000 3G / 4G sites in India. Vodafone has 114 million subscribers in rural India.

Vodafone India’s revenue market share (RMS) rose 0.6ppt to 23.1 percent in the first quarter of FY 2018. Vodafone reported service revenue ARPU of INR 146 in Q2 FY18 due to stiff price competition in the Indian telecom market.

Data usage grew 250 percent in Q2 FY18. Data usage per subscribers for users with >1MB reached 2.7GB in Q2 fiscal 2018. Vodafone Play, Netflix and Magzter are driving data usage.

Vodafone said it has upgraded the entire radio network to all-IP technology and is ready for 5G in future. Vodafone also started Massive MIMO trials to enhance the capacity of a base station by five to seven times and reduce interference substantially.

The acquisition of You Broadband enabled Vodafone India to add customer base of nearly 219,000 across 16 cities including Ahmedabad, Bangalore, Chennai, Gurgaon, Hyderabad, Mumbai, Pune, Surat, Vadodara and Vishakhapatnam.

Baburajan K

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