Vodafone Idea has got a new lease of life with the Centre announcing a relief package last week. The company has been struggling to catch up with other operators given the huge financial stress it faces. BusinessLine spoke to Vodafone Idea’s Chief Executive Officer, Ravinder Takkar, on how the new policy measures will help the telecom operator and how he plans to use the opportunity to take the firm back to its former glory.
How difficult has it been for you to manage operations at a time when you had to deal with multiple challenges including merging two brands — Idea and Vodafone, the pandemic and financial stress?
I wish I could say it was all easy. I think in many ways the resolve strengthened as the challenges kept on piling-up. We have been on this breakneck speed focusing on what we need to do. I think in some ways the challenges helped us to focus our attention on the task at hand. It has been quite a journey.
Many experts believe that the relief package does not help Vi to survive in the long term. Do you agree?
I disagree. I think these are good structural reforms which are all very helpful. It will be for the benefit of the industry and will be important. It is a good indication of where the government’s mindset is. Decisions like giving a moratorium on payments for four years and the one on bank guarantees really provides a relief to the company which is a very important step.
The decision on converting deferred payment to equity after four years is another bold step. The underlying message that the government is saying is they believe that competitiveness of the industry is important. They believe that at least three players need to exist in the market to make sure the sector is competitive.
So one should not write-off Vi yet?
We have always maintained that we believe our company will survive. We were always convinced that that is going to be the case. Now, with this relief package from the government, if there was any other doubt in anyone’s mind about our survival, that question mark is over.
The government’s actions signals that instead of paying the dues now, we can invest in the business itself, invest more in network, invest more in coverage, invest more in capacity and digitisation. This has also been a huge vote of confidence for the investors also. From their perspective, questions were asked — Is the government serious about keeping competition alive? The government package has eliminated all those doubts.
What is your next move in terms of fund raising?
Our fund raising efforts will be a game changing exercise and that will become much more viable due to the relief package. Earlier investors were asking us - what are you gonna do, are you going to turn around and take away the money and give it to the government? So, that part has been cleared. Now the fresh money can go into the company capex.
Will 4 years be enough to turn around operations and generate enough cash to be able to pay the dues?
We believe that the 4-year time period that the government has given to the industry to get healthier will ensure that the company is not only surviving but thriving. The stage has been set for a significant improvement and change to happen.
How soon will you be able to get fresh funding?
The cabinet has approved a package but the detailed guidelines of how it will happen need to be worked out. We know that the Finance Ministry, in collaboration with the DoT, is working on this. We should have those numbers and details from them very shortly. The main thing to then do is take those numbers, and work out our funding needs to stay competitive.
We need to take it to our board for approval after that. I know that based on the initial response after the release of the package, I think this serves as the opportunity for the investors to jump back into the fray and participate in funding. Because any issue that they are worried about, those impediments are gone. But I think the exact amount in fundraising has to be approved, we have to wait a little to get our business plan and our board of approvals done. Clarity on those is not very far off; in just a matter of days and a couple of weeks, things will start happening.
There has been talk about increasing tariffs to improve cash flow. Will you hike tariffs soon?
There is so much lack of discipline that pricing has been used as a tool, as ammunition to destroy this industry many times over. In this industry, we love to use pricing as a weapon to gain market share and destroy competition. And frankly, we have to get away from that. The three players in the market jointly wrote to the regulator to ask for a floor pricing because the industry cannot discipline itself.
We are in such a stand-off where neither one of us trusts each other to be the first to raise tariffs. The relief package is a game changing effort that the government has taken. With this backdrop, I don’t see why pricing cannot be improved over a period of time . We have to get from an average revenue per user of ₹100 to ₹150 to ₹200 until we reach ₹300 as an industry. Everything suggests to me that customers will be happy to go along in this journey to continue to get this essential service. The environment is set for the industry to do this rather than asking the regulator to do so.
How will you manage to raise fund to invest in 5G?
We don’t see why there would be a problem bringing this money. With this moratorium for the next four years, all our funds are going into the company. Funds could come in the form of additional equity, it could be come in the form of additional debt we could take back from the banks as well.
Since we have no payments to be made in the four years, this money will go to the company. Cash will come as a mixture of equity, debt, price increase and other inputs that will take place in the industry and the other relief that is announced..
Isn’t it a dampener that existing promoters are saying they are not going to pump-in fresh equity?
The promoters have been very supportive of this company. They have invested heavily in the last 10 years. The story that promoters are not supportive is not true. What they have always said earlier was, which is what other investors are saying, that we are not clear about the intent of the government. I think the new package changes this. The promoters have a choice to participate in the fund raising — whether they do or do not is a choice they will make — it is very difficult for me to speculate. But certainly, I don’t see why fund raising can’t be done, in either scenario, with or without them. We have got positive feedback from investors.
While you are going through this fundraising exercise, is there anything you are doing, meanwhile, to address the issue of arresting subscriber-loss?
As we increase our coverage, we expect the decline to go down as well. Right now, if I have a 2G customer in an area where I do not have 4G coverage, then he may opt to port to Airtel. That’s what has been happening. Wherever we have increased our 4G coverage we have seen a decline in this. There is no difference of 4G between my network and any other operators network.