The key takeaway from telecom giant Vodafone Idea’s first ever analyst meeting was this—the company doesn’t expect the two-year-old tariff war to continue. From here on out, the company believes that tariffs will cease the downward spiral they have been on since Reliance Jio first sent the telecom industry into a tizzy by lowering data prices and forcing competitors to follow suit. This belief carries hope for Vodafone Idea, something that’s been in short supply since it announced its maiden quarterly results just over a week ago.
The predicament the company finds itself in is not something most would have seen coming just two years prior. Back then, the decision to merge Idea Cellular and Vodafone India seemed like a match made in heaven. Even their competitors agreed. At the World Economic Forum in Davos in January 2017, Bharti Airtel chairman Sunil Mittal openly backed the idea of Vodafone India and Idea Cellular merging to become the largest telco in the country. “It’s a perfect match… The strength and weaknesses match very well. Rural and urban [subscribers]. Spectrum portfolio,” Mittal said.
This sentiment was evident when the two companies finally announced their merger plans in March that same year. After all, they had a lot to offer each other. Vodafone India had been looking to list on the Indian stock exchanges since around June 2016. Idea, as an already listed company, would help them achieve this. In addition, while Idea had made inroads into rural areas, Vodafone had a larger presence in metros. The merger was supposed to help the companies consolidate their capital and operational expenditure, reduce their debt, and raise their average revenue per user (ARPU) on data plans.
So, when the merger finally went through in August 2018—with the two companies forming a merged entity called Vodafone Idea Ltd—it should have been good news. A bulwark against the unceasing creep of rival telco Reliance Jio.
The maiden quarterly results, however, were more nightmare than fairytale. To begin with, the company posted a net loss of Rs 4,974 crore ($690.35 million) during the September quarter. Vodafone Idea lost 13 million subscribers during the quarter—more than double the subscribers lost by Airtel in the same period. Hopes of an increase in ARPU also proved unfounded. ARPU in this quarter declined to Rs 88 ($1.23). Vodafone Idea has now launched new minimum recharge plans aimed at stemming the ARPU depletion. While its rivals also saw a drop in ARPU, Airtel’s ARPU for the same quarter stood at a comparatively better Rs 100 ($1.4), while Jio’s was an even higher Rs 131.7 ($1.85).
Unsurprisingly, revenue took a body blow. Total revenue fell 7.1% quarter-on-quarter to Rs 12,023.8 crore ($1.66 billion). Earnings before interest, taxes, depreciation and amortisation (EBITDA) was Rs 978.8 crore ($135.85 million), a steep drop of 28.7% from the preceding quarter.
