Vodafone India, the wholly owned subsidiary of British telecom major Vodafone Group Plc. and India’s second largest telecom service operator by number of subscribers, reported 4.1 per cent growth in its operating profits to Rs 13,115 crore for FY 16, Piyush Pandey spoke to Vodafone India MD & CEO Sunil Sood and its CFO Thomas Reisten after the earnings. Excerpts:
There is a buzz about Vodafone India IPO. Why is it slated now?
Thomas: We are in the preparatory stages and we continue to prepare in that context. As in the past, we were talking about IPO as a tool to get equity into the company. That’s the financial side of it. We are very proud to be in India as a Vodafone company and we want to continue strengthening that. IPO is just another way of strengthening it.
The intent of the IPO is to buy more spectrum or repay debt with the proceeds?
Thomas: We will see when we take a decision. At this point of time we haven’t taken a decision. We are still in the preparatory phases. Any IPO has a multitude of reasons on why you are doing that. There are two main reasons. . I would give them equal weightage for sure. An IPO is always driving a company to be a listed company. Secondly, it gives you an equity infusion, for which you have multitude of options on how you use that equity infusion.
Does Vodafone’s impending dispute with tax authorities have an impact on the IPO?
Sunil Sood: That’s for my parent company to decide. They have to decide if they want to go for the IPO and if it impacts them or not. The Vodafone tax decision is my shareholders issue with the Government of India and the two parties are in arbitration together trying to resolve the issue. It doesn’t directly impact my P&L. I am not paying from Vodafone India.
How soon can we expect the IPO to hit the market?
Sunil Sood: We are preparing for an IPO. Preparation for an IPO was there many years back and then it was called off. Last September, our chairman was here and he made an announcement that we will now start preparing for an IPO, so basically it’s a story from last September. And it takes time to prepare for an IPO, lots of regulations and procedure accounting standard that you have to go through to prepare for an IPO. In India, it takes at least a year to prepare for an IPO.
What kind of spectrum are you looking for expanding your 4G network?
Sunil Sood: We have said that in terms of our portfolio for spectrum assets, we will require more spectrum assets than we currently have. This is to deliver better customer experience to our customers. In that respect we have been consistently investing in auctions in terms of adding spectrum to our kitty. We feel that some more is required especially in area of 4G. We have launched five circles in 4G. We announced another four a week back that will take us to a nine-circle footprint.
These nine circles will cover under 70 per cent of our total data revenue today. In India, we need to have a portfolio of products, not just 4G. There is 2G India, there is 3G India and there is a 4G India. And all these three will coexist simultaneously and there will be gradual movement from one to the other. We are investing in all the three technologies together. Not just 4G, we are still investing in 2G technologies and also 3G.
Has the government’s liberalised spectrum policy made it easier for the telcos to acquire it?
Sunil Sood: We are grateful to the government that they have put what we call one of the biggest spectrum auctions in India, especially in terms of quantum of spectrum that is available. The government has heeded to our plea that it should put all the spectrum that is available out there and the government has been working towards this area and we are thankful to the minister, DoT and TRAI for enabling it to happen. And from what I understand, this includes the new defence spectrum which is being released and will come into this kitty. The new laws which they passed in terms of harmonizing are also enabling some of that to happen. Last year, they passed some laws for trading as well as sharing.
What funds have you allocated to buy spectrum in the upcoming auctions?
Sunil Sood: We are looking at increasing our assets from whatever means possible, whether through sharing, trading, or through auction. It all depends upon the pricing, the business case and the availability and our needs. We can’t give you a forward looking statement because it will reveal my auction strategy. Why should I want my rivals to know about my auction strategy? The spectrum action figures will not be even known to my lieutenant . It’s a secret.
Do you see Reliance Jio as a threat and how are you prepared to embrace the competition?
Sunil Sood: In general, we don’t comment on competition but let’s put it this way. My focus is on delivering a super Internet experience to my customers and I have defined what super net experience is. It’s super video, HD voice, super streaming, and a super network with a super service to my consumers. And that is what I am trying to deliver and if he is satisfied with the existing network, he is getting a super net experience. So, why should he leave? That’s the best defence.
Don’t you think there will be pricing pressure with Jio’s entry?
Sunil Sood: I don’t think, I only act when I see information. I plan. My plan is to give the best and most fabulous experience to my customer and ensure that they consider myself as a high-value, high-perception brand, which they have been loyal to for so many years and they will continue to be loyal because I am giving them the super net experience they have been looking.
Thomas: One thing that you need to really see in the context of overall pricing discussion is that we have been able to maintain our service level ARPU at a very healthy level at Rs.195 that is stable .
That’s just the demonstration of what is really important in the business that we offer right service to our customers, which enables us to grow our revenue going forward.
