Vi to focus on 4G expansion, 5G rollout after FPO

Vodafone Idea (Vi) is planning to utilise the proceeds of its Rs 18,000 crore follow-on public offer (FPO) primarily to increase the coverage and capacity of its 4G network. It will also use the proceeds for its 5G services rollout, revenue growth, expansion of enterprise business and to monetise the digital opportunities.

Speaking about the scope for growth in the telecom industry, Vi CEO Akshaya Moondra said, “The average revenue per user (Arpu) for India is just $2.08, which is very small compared to $6.64 and $45.41 for China and the US respectively. Apart from that, telecom penetration in India is at 83% and 4G penetration stands only at 66% against 116% in China.”

He said the gap will ultimately be bridged over due to the increasing use of UPI, e-commerce and increasing data traffic. In the last seven years, data consumption in the country has grown 82-fold, and voice consumption 2.6-fold.

Moondra said Vi is “confident about our revenue plans as 42% of our 215 million subscribers use 2G networks. This means that many of our subscribers have access to 4G devices but cannot use 4G network due to the unavailability of networks in their locations”.

He said Vi is also strengthening its enterprise business, where it already enjoys a dominant position. “We are planning to strengthen our traditional connectivity services and expand new services like internet of things (IoT), clouds etc,” he said. He claimed that Vodafone Idea is the only company to offer end-to-end integrated IoT services and the first one to provide the e-sim with GSMA compliances.

Moondra added that the Indian telecom sector is in dire need of price correction. “The returns on investment of an industry depends on its structure. Earlier, there used to be more than 10 private players but now the industry consists of three private and one public player,” he said. “This is the right structure, which can deliver returns to the industry players. After the consolidation of the industry between FY16 to FY19, the industry has witnessed a CAGR of 13% for the period between FY19 to FY23. The fact that in the last seven years the Arpu of the industry grew only 1.24 times means that the price correction in the industry is necessary and the customers are ready to pay for better services.”

Talking about Vodafone Idea’s 5G rollout, Moondra said the 5G speed doesn’t make much sense for small screen users because watching a 4K or 8K quality video doesn’t make much difference on a mobile screen. The investment in 5G services should be done while keeping an eye on the business case and investment scenario in the sector.

On Vi’s performance, he said, “In the last two years, we have reduced the debt by Rs 17,000 crore to only around Rs 4,500 crore as of February 2024. After struggling for years, Vi has also witnessed a growth of 10% y-o-y in FY23. Additionally, we have been successful in increasing our data capacity to 82 petabytes from 25 petabytes four years ago. And in the last 10 quarters, the number of subscribers and Arpu have witnessed positive growth in each quarter.” Financial Express