Pricing revival imperative for telecom sector health in long run, says Kumar Mangalam Birla

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Published: August 2, 2019 8:47:15 PM

"The Indian telecom operators continue to operate in tough market conditions as competitive pressures forced operators to offer pricing plans, which are the cheapest in the world," Birla said in his note to shareholders in the company's annual report for 2018-19.

Kumar Mangalam Birla, telecom sector, Vodafone Idea chairman, Bharti Airtel, Vodafone Idea, Mukesh Ambani, reliance jioBirla pointed out that while operating challenges for the industry remain, sectoral consolidation has resulted in creation of three private and one public sector operator and these players will “benefit from the long term sector opportunities”. (IE photo)

Competitive pressure and heavy investment requirements have “significantly worsened” the financial woes for the Indian telecom sector, and pricing revival is imperative for the industry’s long-term health, according to Vodafone Idea Chairman Kumar Mangalam Birla. Birla pointed out that while operating challenges for the industry remain, sectoral consolidation has resulted in creation of three private and one public sector operator and these players will “benefit from the long term sector opportunities”.

“The Indian telecom operators continue to operate in tough market conditions as competitive pressures forced operators to offer pricing plans, which are the cheapest in the world,” Birla said in his note to shareholders in the company’s annual report for 2018-19. He noted that the competitive pressure was compounded by the massive investment requirements for expansion of broadband coverage and capacity.

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“(This) has significantly worsened the existing financial stress in the Indian telecom sector overall and further undermined the position of all operators. Hence, pricing revival is now imperative for the long term sector health,” he said. Birla exuded confidence that Vodafone Idea is well-positioned to be successful in the new consolidated marketplace with its largest spectrum portfolio, network of sites and optical fibre, distribution reach and strong customer affinity.

“With industry consolidation now over, we believe that all existing operators are well-placed to benefit from the several opportunities ahead. Customer needs continue to evolve with higher demand and consumption of both voice and data,” he said.

Older operators — Bharti Airtel and Vodafone Idea — have been locked in a bruising tariff war with Reliance Jio, backed by India’s richest man Mukesh Ambani. Jio’s free voice and dirt-cheap data offering have dented the financial metrics of these operators, deepening the impact of regulatory decisions like cut in termination charges, even though the voice and data usage, per se, have been growing at a scorching pace.

Vodafone Idea — which is scheduled to hold its 24th Annual General Meeting on August 27 — had posted a consolidated loss of Rs 4,873.9 crore for the June 2019 quarter, compared to a loss of Rs 4,881.9 crore in the fourth quarter of 2018-19. Its revenue also declined in the quarter under review to Rs 11,269.9 crore against Rs 11,775 crore logged in January-March 2019.

It had 333.6 million active subscribers as of May 31, 2019. The AGM will seek shareholders’ nod on a slew of proposals, including approval for increase in authorised share capital, re-appointment of Arun Thiagarajan and appointment of Suresh Vaswani as independent directors, amongst others.

The annual report said Vodafone Idea CEO Balesh Sharma, who took over the role from August 31, 2018 after the merger of Vodafone India with Idea Cellular, drew a salary of Rs 4.9 crore in FY’19. The remuneration of CFO Akshaya Moondra was Rs 3.22 crore in FY’19. He was a whole-time director and chief financial officer at Idea Cellular and post the merger, took on the role of CFO of the merged entity.

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