Vodafones India revenues rise despite tariff war

Written by fe Bureau | Mumbai | Updated: Nov 11 2009, 06:18am hrs
Despite an intense competition on the tariff front, Vodafone, Indias second largest mobile operator by revenues, reported a 20.5% growth in service revenues at constant exchange rates for the half year ended September 30, 2009. This includes a 6.4 percentage point benefit from Indus Towers, a revenue stream generated by the network sharing joint venture. UKs Vodafone Group Plc on Tuesday announced its half-yearly results.

Growth in India during the six-month period was driven by a 54.8% increase in the average mobile customer base, which was partially offset by a fall in the effective rate per minute and a decline in usage per customer as competition intensified and penetration gains shifted towards rural circles. During the period, Vodafone added 14.1 million customers in India, taking the total subscriber base at 82.8 million at the end of the September quarter.

Growth in revenue in India was also impacted by a termination rate cut effective from April 2009. Ebitda margin declined by 4.4% primarily as a result of the expansion into rural areas and market price reductions offset by scale efficiencies. We have continued to drive penetration in India and invest in network coverage. Following the recent launches of a number of new entrants, competition in the Indian market is intense and will remain so for some time. During this phase of Indian market development, we will focus on leveraging Vodafone's brand, scale and cost efficiency and disciplined capital expenditure, said Vittorio Colao, CEO, Vodafone Group. "Economic prospects for India remain attractive and in the medium-term, in-market consolidation should improve returns. Vodafone is well positioned to benefit from the long-term opportunity in India."

Vodafone is not listed on the Indian bourses, and its two main competitors in India, Bharti Airtel and Reliance Communications, reported weak earnings in their recent results owing to the heightened price war.

According to analysts, the average revenue per user (ARPU) for Vodafone slid from Rs 247 in the June quarter to Rs 222 by September 30, 2009. The minutes of usage increased from 71,775 million to 76,135 million. But due to tariff reductions, the increase in usage could not result in rise in revenues. The churn rate also increased to 33.3% with prepaid subscribers accounting for most churns.

Meanwhile, Vodafone Group reported a 121% increase in profit by to 4.79 billion pound during the period ended September 2009 as against 2.169 billion pound in the same period last year. Revenues surged by 9.3% to 21.76 billion pound compared to 19.9 billion pound in the year-ago period.

We have confirmed our guidance for the full year, despite the uncertainties of current economic trends. The 1 billion-pound cost reduction programme is expected to be delivered a year ahead of schedule and we have extended this to a further 1 billion pound of cost savings by 2012. At the same time, we have maintained our capital investment at 2.6 billion pound in the first half, delivering further improvements in network quality and performance for our customers, Colao said.