Funding discussions are on with banks, other sources: Vi CEO Moondra

Says lack of 5G not hurting customer numbers so far, will rollout service as soon as investments come.

Vodafone Idea (Vi) continues to be in talks with banks and other sources for funding, the telco's CEO Akshaya Moondra said on Friday.

Speaking at a post-result analyst call, Moondra said the company's promoters were also ready to contribute more equity. Former chairman Kumar Mangalam Birla returned to the Vi board in April as additional director, less than two years after leaving it.

“Currently, multiple discussions are on with regards to securing funding from third-party sources in the past month or so, after the equity conversion by the government," the CEO said. He said with the reforms package now implemented, funding talks have accelerated.

He did not give a tentative timeline as to when the company may be able to secure fresh funds, or provide a plan to the government.

On Friday, Birla met Finance Minister Nirmala Sitharaman. The reason for the sudden meeting, coming days after Bharti Enterprises Chairman Sunil Bharti Mittal met her, was not immediately clear.

5G plans

Any new funding by banks will be used for the deployment of capital expenditure, and not to roll over existing dues, the company said on Friday.

“5G is a part of our plans. The plans we have submitted to banks focus on establishing and expanding 5G networks,” Moondra said.

He said the share of users using 5G-enabled devices to access the network was around 8 per cent. At this point, the unavailability of 5G is not affecting user numbers, he insisted.

The company earlier said it was in continuous talks with network vendors to finalise its 5G rollout plans.

"The competition is giving 5G data for free. This is good for the consumer but as had been pointed out by them, as well, this is not sustainable and 5G data will have to be charged later on,” he said.

Vi's two main competitors -- Reliance Jio and Bharti Airtel -- have already launched 5G services in 4,333 and 3,500 cities, respectively.

According to existing government rules on minimum service obligations, the company would need to deploy 5G services by September. Non-compliance attracts a financial penalty, and if there is a delay of service launch of more than 52 weeks, the spectrum assigned can even be taken back.

"Everybody would need to have 5G coverage later on, as and when it comes. Whether they use it or not, customers would like to have the option to use 5G,” Moondra said.

Customer churn 

The CEO said the telecom industry is spending between Rs 12,000-14,000 crore on customer acquisition. But a lot of this spending is going towards rotational churn. Rotational churn is also present in the MNP segment, as well as fresh connections.

He yet again pointed out that tariffs need to go up. “Telecom is the cheapest essential service which brings you the maximum value,” he said.

While Vi's 4G subscriber base continued to grow, reaching upwards of 122 million by the end of Q4 FY23, Moondra conceded the company's 4G coverage was limited and it had not been able to make the necessary investments in the space over the past two years. 

“Until the investment begins, Vi would not be in a position to take effective action to improve 4G coverage and arrest the fall in overall subscriber numbers,” he said.

Slow recovery

Corporate results released a day before showed Vi's consolidated net loss was 2.2 per cent lower at Rs 6,418 crore in Q4Fy23 on a year-on-year basis. On a sequential basis, the net loss declined by 19.6 per cent, down from Rs 7990 crore.

Moondra, on Friday, pointed out that FY23 was the first year when the company saw revenue growth (2.8 per cent) after the merger of Vodafone and Idea. Gross revenue in Q4 increased to Rs 10,531 crore on an annual basis while Ebitda declined by 9.4 per cent to Rs 4,210 crore.

Average daily revenue also improved by 1.4 per cent in Q4, which was the seventh consecutive quarter of growth.

The average revenue per user (ARPU) remained flat at Rs 135 on a sequential basis and rose 8.8 per cent on a year-on-year basis. The company spent Rs 8000 crore to service debt in FY23. However, top management insisted that payables were broadly flat in the fourth quarter (January-March) of FY23.