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Vodafone India: Voice tariffs need to go up

Turning profitable for the first time after entering the country, Vodafone India said mobile tariffs need to go up as input costs are rising, but smaller operators offering cheaper rates are not m

  • Published: May 21, 2014 1:03 PM IST
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Turning profitable for the first time after entering the country, Vodafone India said mobile tariffs need to go up as input costs are rising, but smaller operators offering cheaper rates are not making it easy. “Yes, of course, prices need to go up because the industry had lower prices for 17 years. We increased prices by 6.2 percent last year, which is far below inflation,” Vodafone India Managing Director & CEO Marten Pieters told reporters here today. Also Read - Best Vodafone-idea (Vi) prepaid plans under Rs 100: List of plans, unlimited data, voice calls, more

He said Vodafone’s revenue per minute (RPM) of about 47 paise is among the highest in the country, but it would be difficult to increase prices because some of the smaller players that offer very low prices are hesitant to increase rates. “The issue is smaller operators who do not realize 47 paise but lower, maybe 33 paise or lower, and it’s very difficult for us to go to 53 paise if the next guy in the industry is charging 33 paise,” he added. The Vodafone India head said there needs to be less competition in the market. Also Read - Vi prepaid recharge plans July 2021: List of all Vi recharge plans under Rs 500 with benefits, validity

“It’s not so much about us increasing the prices but them bringing prices up, that is what should happen in the industry, which is very good for them, but apparently they are hesitant to do it,” he said. The country’s second-largest operator today reported a 25.9 percent jump in EBITDA (earnings before interest, taxes, depreciation and amortization) to Rs 13,398.6 crore for FY14 on growth in data and increased call charges, compared with Rs 10,640.6 crore in FY13. This is the first time the company has reported a net profit since its entry into the country in 2007.

“Yes, we are net positive in this fiscal but we need to treat this with caution because we are going to next spectrum auction at some point. We continue to invest into network so there is a lot of investment that we do in the next fiscal year and that we need to take into account,” Vodafone India Chief Financial Officer Thomas Reisten said. The company’s service revenue rose 13 percent to Rs 37,606 crore for the financial year from Rs 33,281.8 crore previously.

“Data has been great for us with 72 percent growth on browsing, increase in customer base and minutes of usage per user and price hardening,” Reisten said. Pieters said the regulatory environment in the country has stabilized, although some issues need to be resolved. “The situation has basically stabilized and we have seen a more conducive environment but still there are issues which need to be resolved,” he added.

Pieters said the spectrum usage charge (SUC) for telecom operators at 5 percent is very high.  Also among Vodafone’s concerns was the matter of an entrant in the voice market being allowed to pay a 1 percent SUC, which is meant for Internet service providers and not for fully licensed operators, he said. The company had a capital expenditure of Rs 7,009.4 crore in FY14 with investments in new site roll-outs. Vodafone said it is likely to continue with similar capex plans in FY15, although it declined to share the exact amount.

Vodafone India ended the year with 166.6 million customers and a network of over 119,700 sites, of which 22,400 are combined (2G+3G) sites. It had 52 million data users, of which 7 million were 3G customers. Net debt for FY14 stood at Rs 49,000 crore. The average revenue per user (ARPU) for the company was Rs 199 while data ARPU was Rs 65. Pieters said the industry’s hopes are high now and expectations are that the incoming government, with its strong mandate, will quickly start to address some of the factors inhibiting stronger economic growth.

However, he added there would not be any speedy economic recovery as there are many structural issues to be resolved. Asked about the wishlist for the new government, the Vodafone India head said spectrum availability at reasonable rates is top priority, followed by rationalization of taxes and duties. “Getting more spectrum available at reasonable prices – that is priority number one. Second thing is that the industry is charged and levied too much, about 28 to 29 percent of our gross revenue goes straight to the government in the form of taxes, license fees, SUC, import duties etc, which is really high compared to other countries,” he said.

Vodafone Group’s revenue declined 1.9 percent to GBP 43.6 billion in FY14. Group profit jumped multi-fold to GBP 59.42 billion after including a GBP 45 billion from the sale of Vodafone’s US group, which held a 45 percent stake in Verizon Wireless.

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  • Published Date: May 21, 2014 1:03 PM IST



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