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Vodafone Idea faces subscriber as well as employee churn

“Employee benefit expenses decreased by Rs 294.9 crore from Rs 2,030 crore for the year ended March 31, 2021 to Rs 1,735 crore for year ended March 31, 2022 primarily due to reduction in head count,” Vodafone Idea said in its annual report for FY22.

Vodafone Idea faces subscriber as well as employee churn
Even when the scale of operations is the same as the other two operators, Bharti Airtel and Reliance Jio do not seem to be facing employee exodus.

Troubles for Vodafone Idea seem far from ending as with a continuous loss in subscribers’ base, the telecom company is also facing a sharp employee churn over the last few years. Even when the scale of operations is the same as the other two operators, Bharti Airtel and Reliance Jio do not seem to be facing employee exodus.

The permanent employee count for Vodafone Idea has fallen over 35% in the last four financial years. As of March 31, 2022, the number of permanent employees on the rolls of the company was 8,760 compared to 13,520 in FY19. A higher employee count of the company in FY19 was also due to the merged operations of Vodafone India with Idea Cellular during the year.

“The employee churn happens at every company but for Vodafone Idea it is a key parameter as the company is already struggling with a weak financial position,” a Mumbai-based analyst said. As a result of reduction in employee count, the company’s consolidated employee cost, which includes salaries, allowances, and other benefits fell by over 24% to Rs 1,735 crore in FY22, compared to Rs 2,294 crore in FY19.

Also Read: IT cos headed for lower attrition in coming quarters as global macro woes tame high churn, say analysts

Despite an 8.1% on year increase in median remuneration for its employees in FY22, the company’s employee spends fell 14.5% from Rs 2,030 crore in FY21.

“Employee benefit expenses decreased by Rs 294.9 crore from Rs 2,030 crore for the year ended March 31, 2021 to Rs 1,735 crore for year ended March 31, 2022 primarily due to reduction in head count,” Vodafone Idea said in its annual report for FY22.

In comparison, Bharti Airtel’s employee cost has been increasing at 7-8% for the last two years. The company spends about 4% of its revenue on its employees, which has been largely stable for some years now. As of FY22, the company has spent about Rs 4,443 crore on its employees, which is an increase of 7% from the last year. Bharti Airtel’s permanent employee count at the end of March 31, 2022 was at 10,142 compared to 9,691 in FY21.

The company gave around 4.4% median salary hikes to its employees during the last financial year.

For Reliance Jio, the employee count was not available but the company too witnessed an increase in employee spends by about 7% to Rs 1,539 crore in FY22. The Reliance Industries-owned telecom operator spends about 2% of its annual revenue on employee cost.

While employee cost of all the telecom players is between 2-4.5%, the key difference is the growth in revenues. For Bharti Airtel and Reliance Jio, the revenues are growing significantly but a weakness in Vodafone Idea’s topline, coupled with higher expenses raises questions on its continuity as a going concern.

In FY22, Vodafone Idea’s consolidated revenue fell over 8% on year to Rs 38,516 crore. In FY21 and FY20, Vodafone Idea’s revenue from operations stood at Rs 41,952 crore and Rs 44,958 crore, respectively. On the other hand, revenues for Reliance Jio and Bharti Airtel grew at 10-15% on year in FY22.

Vodafone Idea’s finance cost, which mostly includes its interest dues to the government rose over 10 times to around Rs 20,980 crore in FY22 from Rs 2,096 crore in FY16. Given its current position, the company barely has cash to repay its debt and is dependent on external fundraise and interest dues conversion into equity by the government which has been pending for long now.

As the weak financial position of the company weighs on its operations, the same can also be seen from the fact that Vodafone Idea has lost 2.9 million wireless subscribers in the last 16 months, according to data released by Trai for July.

In comparison, peers Bharti Airtel and Reliance Jio have been increasing their market shares on the back of Vodafone Idea.

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First published on: 17-10-2022 at 01:45:00 am