Global telecommunication major Vodafone’s India organic services revenue in fiscal third quarter fell 1.9% to EUR 1.45 billion due to intense competition from the new entrant Reliance Jio’s free offers and low volume sales due to demonetisation, it said on Thursday adding that it expects the business to decelerate in the fourth quarter.
“We anticipate intense competitive pressure in India in the fourth quarter and are taking a series of commercial actions, including the extension of 4G services to 17 leading circles,” Vodafone Group Chief Executive Officer Vittorio Colao said in a statement.
The UK-based telecom giant also forecast its full-year net profit guidance to the low end of its previous range, saying investments supporting its India operations will continue to hurt results.
The impact of competition from Reliance Jio’s free voice and data services in India partly offset Vodafone’s performance in South Africa, Turkey, Middle East and Asia Pacific, Colao said.
Reliance Jio’s entry into the telecom space has forced the incumbent players to drastically cut tariffs – as much as by 66% – in order to retain their customer base, and has put the entire sector under tremendous pressure of choosing between protecting margins and user base.
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Reliance Jio recently extended its inaugural free voice and data plan till March 31 drawing complaints and criticisms from its biggest rivals Airtel, Vodafone and Idea, who assert that its anti-competitive practices and freebies are hurting the industry. Vodafone went as far as to write down the value of its India business on hyper competition from the new entrant.
Colao reiterated on Thursday that Vodafone is in talks to merge its Indian unit with Idea Cellular, an Aditya Birla group company.
Earlier this week, India’s second-largest telecommunication services provider Vodafone confirmed it is in talks for an all-share merger with the third-largest operator Idea Cellular, in the first consolidation move in the Indian telecom industry reeling under the pressure of intense competition from Reliance Jio’s free service offers.
“This is about creating an amazing asset and a very strong company, not about retrenching,” Colao said on a conference call.
The proposed merger between Idea Cellular and Vodafone India could give them some bandwidth to take on the heightened competition from Reliance Jio.
A possible Vodafone-Idea combine will surpass Bharti Airtel as the largest telecommunication company with a total subscriber base of 39 crore, far ahead of Reliance Jio’s 7.2 crore. Further, the combined entity would have 43% of the revenue market share and 40% of the active subscriber base, research firm CLSA said.