Vodafone Idea flags industry#39;s unsustainable financial duress; hopes for govt support

Representative image

Representative image

Ailing telecom operator Vodafone Idea has flagged the industry’s “unsustainable financial duress” in its latest annual report and hoped that the government would provide the necessary support to address “all structural issues” faced by the sector.

In the Chairman’s letter to shareholders, Himanshu Kapania cited persistent challenges in the operating environment, amid “unsustainable pricing” and “hyper-competition” during FY21. Kapania expressed hope that government will support efforts to generate reasonable returns on massive investments.

“As the industry continues to remain under unsustainable financial duress, your company is hopeful that the government will provide the necessary support to address all structural issues faced by the sector,” said Kapania who was elected by the VIL board as non-executive Chairman after Kumar Mangalam Birla stepped down from the position, in early August.

VIL with a history of providing 25 years of mobile services to the country “is hopeful that the government will support its efforts to generate reasonable returns on their massive investments”, he said.

Through the course of FY21, the operating environment continued to remain challenging due to unsustainable pricing and hyper-competition, which were further aggravated by the COVID-19 pandemic, Kapania noted.

While the operating challenges remain, increasing digital penetration that has got a further boost during the pandemic remains a massive opportunity for the telecom industry especially when the pricing revives in future, said the company.

VIL “believes the government recognises the criticality of the sector and the importance of retaining healthy competition amongst private sector operators”.

“…while the company awaits the final Government’s decision, it will continue to remain focused on providing quality service to the customers and sustain intensity in the market,” Kapania added.

The longer-term prospects for the Indian economy continue to be robust, as initiatives such as privatisation of public sector enterprises, monetisation of assets, implementation of National Infrastructure Pipeline, Production-Linked Incentives Scheme and the new Labour Code, is expected to spur a virtuous cycle of investments and growth in the medium-term.

Rising content consumption, especially through video, and social media usage is driving strong demand for high-speed internet, and VIL with its strong spectrum portfolio, large network investments in the form of network sites and optical fibre, wide distribution reach and strong customer affinity is “very well-positioned” to benefit from opportunities presented by the market, said the chairman’s note.

VIL is focused on driving 4G penetration to increase Average Revenue Per User (ARPU), and strengthening its position on business services, especially the fast-growing segment of IoT (Internet of Things) and cloud services.

“Your company continues to focus on its platform capabilities to offer deeper integration with its partners for a differentiated experience, create monetisation opportunities and truly become an integrated digital service provider,” Kapania said.

Alongside the cost optimisation exercise, these initiatives “will improve revenue and profitability and subsequently strengthen your company’s overall competitive position in the market”, he added.