Good afternoon, ladies and gentlemen. This is Zico, the moderator for your conference call. Welcome to the Vodafone Idea Limited conference. For the duration of this presentation, all participant lines will be in the listen-only mode. After the presentation, a question-and-answer session will be conducted. Should you need assistance during the conference call, please signal an operator by pressing * then zero on a touchtone phone. Please note that this conference is being recorded. We have with us today Mr. Akshaya Moondra, CEO of Vodafone Idea Limited, and Mr. Murthy GVAS, CFO of Vodafone Idea Limited, along with other key members of the senior management on this call. I want to thank the management team on behalf of all the participants for taking valuable time to be with us.
Given that the senior management is on this conference call, participants are requested to focus on the key strategic and important questions to make sure that we make good use of the senior management's time. I must remind you that the discussion on today's call may include certain forward-looking statements, and must be viewed, therefore, in conjunction with the risks that the company faces. With this, I now hand the conference call over to Mr. Akshaya Moondra. Thank you, and over to you, sir.
Thank you, Zico. A warm welcome to all participants to this earnings call. Last week, our board of directors adopted the unaudited results for the quarter ending September 30, 2023. All the results-related documents are available on the website, and I hope you had a chance to go through the same. Let me provide a brief on our strategic initiatives and key highlights for the quarter. Post this, I will hand over to Murthy to share details on the company's financial performance. Let me first talk about recently concluded India Mobile Congress, wherein the company, through partnerships and with ecosystem players, has developed a diverse range of use cases across enterprises, consumers, and community development, showcasing the transformative power of next-gen technology and the 5G network. The Vi booth presented an array of cutting-edge solutions under the theme, Innovations for a Better Life.
We also showcased first-ever advanced IoT solution, Sanchar Shakti, to make the ports of the company's country smarter, connected, and more efficient at par with the world's best infrastructure. Developed in partnership with a couple of startups, Sanchar Shakti solution is designed to propel the Honorable Prime Minister's ambitious Gati Shakti Master Plan into reality by enabling an end-to-end journey of seamless flow of goods from port to the last mile, with IoT, private 5G shipping, and next-gen technology. As one of the pioneers in delivering IoT-enabled growth in India, we are committed to continue developing an IoT-centric ecosystem and empowering MSMEs in their digital transformation journey with our Ready for Next solutions. We are poised for next phase of growth with next-gen technologies that will usher in a connected world with boundless digital innovative solutions across various sectors.
We are confident about bringing a significant transformation in customer experience, drive operational efficiency, and improve business performance for our partners and consumers, which further will positively impact the growth of the Indian digital economy. Further, we showcased our curated Ready for Next 2.0 solutions like CPaaS, Colocation, and Cloud Services, which can help SMEs on their digitization journey. We continue to use the innovation and technology for public good across livelihood, education, and digital financial literacy. Moving on to update on our strategic pillars, the first priority area for us is focused network investment. While our network investments have been impacted on account of liquidity constraints, we continue to upgrade the existing non-4G sites to 4G by spectrum reforming. Over the last one year, we have added more than 800 unique 4G towers and over 5,800 4G broadband sites.
As a result, our broadband coverage as well as capacity has expanded. This helps us in utilizing our CapEx effectively while ensuring that we continue to offer superior customer experience in these areas as we continue to follow a focused approach to investment, biased towards our 70 priority circles, which contribute over 98% of our revenue and around 92% of industry revenue. Our relentless pursuit to offer better 4G experience to our customers is clearly visible through these network investment initiatives. We also have the highest-rated voice quality in the country as per TRAI MyCall app data for 30 out of 35 months between November 2020 and September 2023. On 5G, we are in discussion with various network vendors for finalization of our rollout strategy. We continue to work with various partners to develop use cases and build device ecosystem.
Moving on to market initiatives. Our brand, Vi, continues to garner good reception, building brand affinity across all customer segments in the country. The company continues to make extensive progress on the marketing front by communicating key differentiators to consumers, entering into alliances, and introducing various innovative products and services. We recently launched our new brand campaign, Be Someone's We, rooted in the company's vision of being a partner to its customers in building a better today and a brighter tomorrow. Humans have inherently been social beings. Since the evolution of mankind, humans have always been together to survive and thrive. However, today's world poses new types of challenges. Several industry studies indicate that people from all walks of life, especially the Gen Z and millennials, are struggling with challenges such as loneliness and social isolation, impacting their overall well-being.
This underscores the crucial need to establish genuine emotional connection in our ever, ever-evolving physical world. Bringing together the best of both worlds, where physical and digital realms intertwine, our campaign is designed to deliver a powerful message of supporting one another through both good and challenging times, even with the smallest of action. It draws inspiration from everyday life scenarios to illustrate how a network can serve as a bridge for forming human or social bonds, promoting inclusivity and fostering a sense of togetherness. Further, we continue to work on our offerings to make them more relevant to the changing customer needs and behavior, and recently revamped our offerings to make them more relevant to the customer. India is a diverse country where cultures, languages, and even last names often overlap. However, all telecom companies have traditionally offered one-size-fits-all kind of plan.
We recognize basis Urban Consumer Insight Trends Report FY 2023, that consumers need more choice and control on the benefits. Accordingly, we have pioneered a new era of personalization, offering the freedom to select and customize benefits tailored to customers' unique preferences, reflecting the spirit of India's diversity. This initiative enables our postpaid users the freedom to opt for exclusive lifestyle benefits across entertainment, food, travel, and mobile security. Our focus is to empower our customers by granting them the autonomy to tailor their mobile experience to their unique preferences. By integrating preferred OTT subscription, enhanced security measures, and lifestyle privileges, we are delivering a holistic solution that resonates with the digital lifestyle of today's user. Vi Max is a testament to our dedication to driving value, power, and convenience for our cherished customers, enabling them to flourish in the digital era.
We continue to focus on getting more customers on 4G unlimited plans for further ARPU improvement. We have seen ARPU growth from nine consecutive quarters now. Q2 FY 2024 ARPU stands at INR 142, compared to INR 139 in Q1 FY 2024, a quarter-on-quarter growth of 2.1%. On a year-on-year basis, ARPU has increased by 8.7%. You may recollect that at the end of last quarter, we had changed entry-level pricing, where the validity of INR 99 plan was reduced from 28 days to 15 days in four of our circles. We have expanded this to 15 circles during the current quarter, and we continue to observe this space and will make further interventions as we go forward.
However, given that many of these tariff interventions are taken during the month of August, the complete impact of these interventions is not reflected in this quarter. That said, tariff rationalization on the higher usage plan and moving to a structure of paying more for using more remains critical to ensure the operators make reasonable returns on their massive network and spectrum investment. Moving on to business services. Business services or enterprise segment is one of our strength areas, owing to our long-standing relationships with our enterprise customers, as well as our ability to leverage from the experience of Vodafone Group in various global markets. We continue to make progress in line with our stated strategy of transformation from telco to techco for our enterprise offerings.
Our planned expansion of services beyond connectivity has seen good traction, and we continue to work with multiple partners to make our offerings more relevant to enterprise customers. In this fast-evolving digital era, enterprise needs have broadened for various services and solutions, be it security, connectivity, or cloud. To cater to these growing needs and as part of our ongoing portfolio expansion, we have partnered with Yotta Data Services to enhance our data center colocation and cloud services portfolio. This partnership will augment our extensive market presence with Yotta's strong position in high-quality data centers, cloud infrastructure, and service delivery capabilities to aid the digital transformation journey of Indian enterprises. We are well-positioned to offer end-to-end solutions, including colocation, managed hosting, public cloud, direct cloud connect, and security on our high-speed network across the country....
We continue to strengthen our focus on the MSME segment through our 360-degree program, Ready for Next 2.0. The program continues to support MSME, MSMEs in digital adoption, transforming their businesses and helping them unlock the growth potential of their business. The next strategic initiative is driving partnerships and digital revenue streams. We have set a strong digital roadmap for the company and have been executing the same through strategic partnerships in our continued journey of being a truly integrated digital services provider. Over the last few quarters, we have significantly expanded our digital portfolio with the addition of music and video streaming, gaming and e-sport, job, education, and digital advertising, and we continue to add various features to our offering. We are building most of these offerings on our Vi app.
Based on the transformation Vi app and Vi Movies and TV app saw last year, we have seen significant improvement in our customer ratings on Play Store, taking our app ratings to the best in industry. We continue to maintain the same trend. On the consumer side, we launched Vi One, a converged proposition offering mobility, fixed broadband, and content under a single plan during the quarter. It is an industry-first proposition for the prepaid customer. It is a pilot launch with our subsidiary, YOU Broadband, in 12 cities across 3 circles, and now we are in the process of expanding it to other markets with other partners. This brings to the consumer the unified proposition offering mobility, broadband, and content as one package. That is, through a single plan, bringing convenience and value to the consumer.
We would like to reiterate that we will continue to have a disproportionate focus to build a digital ecosystem with our partners, enabling a differentiated experience for Vi users, which will help us to drive consumer stickiness as well as provide incremental monetization opportunities. We have a strong pipeline for Q3. We are in the final stages of launching propositions for connected TV, cloud gaming, and a few new categories, where we have signed some strategic partnerships to drive monetization. You will hear some news coming around that very soon. Moving on to other highlights. The 4G subscriber base continued this quarter and stood at 124.7 million as on September 30, 2023, versus 122.9 million in Q1 FY 2024. An addition of 1.8 million 4G subscribers during the quarter is the highest 4G subscriber addition in last eight quarters.
With improving operations, we have seen lowest quarterly subscriber decline of 1.6 million since merger. The overall subscriber base stood at 219.8 million. Revenue for the quarter stood at INR 107.2 billion, a quarter-on-quarter improvement of 0.6%, aided by better subscriber mix and 4G subscriber addition. ARPU improved to INR 142, up 2.1% quarter on quarter, versus INR 139 in Q1 FY 2024, primarily aided by change in entry-level plan, 2G to 4G upgrade, and migration of subscribers to higher ARPU plan. The overall data volumes were up 2% quarter on quarter, and we continue to see the increase in the data usage per broadband customer, which now stands at around 15.8 GB per month.
With that, I hand over to Murthy, who will share the financial highlights for the quarter.
Thank you, Akshaya. A warm welcome to each of you. As Akshaya mentioned, revenues for the quarter stood at INR 107.2 billion, a quarter-on-quarter improvement of 0.6%, aided by better subscriber mix and 4G subscriber additions. This is also the ninth consecutive quarter of growth in ARPU and 4G subscribers. Quarterly EBITDA, excluding Ind AS 116 effects, improved from INR 20.2 billion in Quarter One FY 2024 to INR 20.6 billion in quarter two. The reported EBITDA stood at INR 42.8 billion, as compared to INR 41.6 billion in Quarter One FY 2024. Further, the depreciation and amortization expenses and net finance costs for the quarter are INR 56.7 billion and INR 65.3 billion, respectively.
Excluding the impact of Ind AS 116, the depreciation and amortization expenses and net finance costs for the quarter stood at INR 41.8 billion and INR 56.3 billion, respectively. Following the Supreme Court ruling in October 2023, relating to the tax methodology on the revenue share license fees, a tax provision for the past periods of INR 8.2 billion and related Indus have been considered in this quarter. The CapEx spend for the quarter stood at INR 5.2 billion. The total gross debt, excluding lease liabilities and including Indus accrued but not due, as at 30th September, stood at INR 2,127.8 billion, comprising of deferred spectrum payment obligations of INR 1,351.3 billion and AGR liability of INR 681.8 billion that are due to the government.
Debt, debt from banks and financial institutions of INR 78.6 billion and OCDs amounting to INR 16.1 billion. The net debt stood at INR 2,126.6 billion.
... The debt from banks and financial institutions has reduced by INR 72.2 billion during the last 1 year. With this, I hand over the call to Zico and open the floor for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press * and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press * and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Yeah. Good afternoon, all, and thanks for taking my question. Firstly, from the subscriber side, we had a lower decline this quarter, and 4G addition was also improved over the last few quarters. And one of our peer who has reported a number on Friday also shown a higher subscriber addition. Is it a market-wide phenomenon, and what is driving higher subscriber growth in the industry?
Yeah. Hi, Sanjesh. You were saying that the subscriber decline is minimal and the 4G additions is higher. And I would say that it is a mixture of a few things combined together. One is that, of course, the market intensity is higher and the overall customer acquisitions and maybe the additions of customers in the industry is also increasing. As I have also probably said in the past, is that, the subscriber trends we see over the last few years is a mix of new subscribers coming in and multiple SIMs being consolidated. It is a little difficult to assess what is the impact of SIM consolidation, but I think, probably if that impact has reduced over a period of time, we should start seeing the real subscriber growth figures.
As far as VI's performance is concerned, I think, besides the normal performance improvement that we are focusing on in terms of getting better subscriber additions during the quarter, and I think after a long time, while the figure is quite nominal, we've also seen a positive trend on the consumer side of the postpaid business. So I think that is also helping. But one of the main reasons for the trend in this quarter is that we have participated in a government scheme, and that has brought in significant number of new subscribers, including 4G subscribers. So that is one of the things which has helped us in this quarter. But even without that, we would have seen an improving performance in this quarter over the previous quarter.
Fair enough. Fair enough. Second, on the cash management side, I think, bank debt with the Q2, we said that a significant pressure on us will be behind. So now, for second half, what is the bank payment left, and how will—how do we plan to incrementally utilize the capital with the repayment pressure coming down? Will it significantly go towards increasing the CapEx?
No. So I would put it this way, that, we continue to incur some minimal CapEx, and so, that will continue, as to the necessary CapEx in terms of where we are operating today. However, our growth CapEx, in terms of, expanding our 4G coverage and also rolling out 5G, which will go side by side, will happen, based on the new funding being tied up. In the interim, since, our cash generation will now be more than our debt service payment, we intend to use this for, meeting our regular requirements, regular CapEx, and then to some extent, this will go towards, reducing the vendor outstanding. But, any significant CapEx, will happen after the new funding is tied up.
On the funding side, is it safe to assume that we are closer to the, probably in terms of, procuring the funding now?
Let me mention that, which I had also alluded to in the last call, that we have made progress after the government conversion had happened, and discussions are progressing and we've again made progress since our last earnings call. I would expect that we should be able to conclude these discussions, which are relating to the equity investor in this quarter, which is also what I had indicated in the last quarter. With the banks, I think, the discussions have happened earlier, and currently, the focus is on tying up the equity investment, basis which then the banks will process the request for bank funding and process their internal approval process.
Fair enough. One, on the IoT side, the show, the capability showcase is also coming from the technology transfer from Vodafone PLC, because I think they are one of the largest as far as IoT go.
... Yeah, that is right. So I think we benefit a lot from what is happening at Vodafone Group and their leadership position in the IoT segment. And I would describe this as two different parts. One is the volume-driven IoT segment, which is generally going in metering and cost applications, where I think it is a largely, it doesn't require any significant support from Vodafone Group, which is more Indian business, and that is supported by the India team. But if you look at the automotive sector, Vodafone Group is kind of leader in that. So wherever value-added IoT applications are involved, we do benefit from them, and that is the reason why we also have the leadership position in the automotive sector in India today.
Got it. One last bookkeeping question, Akshaya. This INR 822 crore of tax liability, or what we have recognized, how much of it is Indus cost and how much of it is principal?
I'll request Murthy to respond to that.
So, Sanjesh, that INR 8.2 billion is actually the tax charge, and Indus is additional.
Okay, this is only the tax charge and Indus will be over and above.
That's right.
We have more provision for it, Murthy?
We have provision for it.
But not through P&L, or it is sitting in the Indus cost?
It is sitting in the Indus cost.
What will be that number?
That we'll not be able to, you know, share with you separately, because that's a mix of various things. You know, I mean, the Indus figure is what was more relevant. Sorry, I stand corrected. The tax figure was what was more relevant.
Fair enough. Fair enough. That's it from my side. Thanks for answering all the questions.
Sanjesh, if I may add a little bit, I think, generally, this tax should give you anything which is provided right now, will give you a benefit later on.
Okay.
In our position, we are not re-recognizing a deferred tax asset at this point of time, so that, contra effect is not appearing. I would say some of these provisions have also been taken on a bit of a conservative side. We believe that, it could actually be lesser than this, but I think there are many interpretation issues, and I would say this is taken more on a conservative side.
Actually, this should be paid in cash immediately if it crystallizes, or can you adjust against the deferred tax you have?
One is that we have large amount of tax refunds, which we still have to receive from the tax department. So, I mean, again, this is multiple years, and it's a complicated thing, but to my mind, most of it, if anything happens, which will take some time, because this, just to be clear, these calculations, if somebody has to do, they date back to the year 2000, and you do a cumulative calculation from that time. So we've also done, because this came recently, we've done a quick calculation. I think these can convert to actual cash outflow once the tax department has done their working, they kind of come up with what their interpretation and calculation is. There will be some difference of opinion on the interpretation is also possible.
I think it'll take some time, but, most likely, and Murthy can add to that, whether this would largely offset the tax refunds rather than resulting in incremental cash outflow.
Yeah, yeah, that's right, Sanjesh, the tax refunds are higher than this amount, but, you know, currently, we have given all the demands, so till such time there's a trigger, either at an ITAT or a High Court for changes that year because of other disallowances, and then that will lead to the tax officer recomputing this. This will not lead to any outflow immediately.
Fair enough. That's clear, Murthy. Thanks, Akshaya, for answering all my questions, and best of luck for the coming quarter.
Thank you. Our next question is from the line of Kunal Vora from BNP Paribas. Please go ahead.
Yeah, thanks for the opportunity. First one, how has the launch of 5G by competition impacted you so far? And are any of the corporate customers demanding that you offer 5G? And would you say that, like, so far, the impact is not much, or it's something which, is becoming very soon?
So, Kunal, I mean, as you can understand, this is something which we kind of track on a regular basis, and we do believe that we will need to have 5G, but I would say that until now, we have not seen any significant impact of 5G not being with us and being with competition. And I think the reason for that, one is that, let's say, if we look at our trends of churn for 5G device owners and non-5G device owners, there's no significant difference which would be relevant.
Also, if we look at the postpaid subscribers, which then generally is seen as a kind of surrogate for the higher ARPU subscribers or people with more 5G devices, actually, in that segment, in this quarter, we have, after a long time, seen a growth in the net adds in the consumer segment. So really speaking, firstly, both these are indicators that this is not impacting us so much. And I think the reasons for that are that while 5G is a good technology, whether the consumer feels the difference is one thing.... And second, I think as we have discussed, that, while today, people are not paying for 5G usage, as in when it comes to time for payment of 5G usage, currently, the experience on a small handset device is not that different.
But your data consumption for watching, let's say, a YouTube video, would be much higher. And so I think that is also one of the challenges which ultimately will be there, and those who understand it, they may find that. And of course, as the networks get a little more ubiquitous, experience of people on 5G will improve. So I would say it will deliver a good experience over a period of time, but whether people are driven by the need for 5G, we've not seen any significant impact until now.
Okay, thanks for that. Second one is on SG&A costs, it's down this quarter. Last year, this number had seen a sharp increase. Do you see the number stabilize or moderate going forward?
So I would say that, the SG&A cost, generally on the customer acquisition part, which is the part of this cost, the cash cost would have gone up a little bit in this quarter. But if you recollect, last quarter, we had made a change in the life of customer, because of which the deferment, being lesser, the impact on the PNL was higher. So this quarter, there is no impact on the, because of the change in life. So from a PNL charge, it is appearing better, and we've also taken some initiatives to reduce the cost on the SIM side.
Just from a pure market activity, given that our gross ads are higher in this quarter, our overall market-based customer cost of acquisition has increased, but that has been offset by other savings, largely the SIM cost savings, where the deferment being, there's a deferment being higher in this quarter, because last quarter we had changed the life of the customer.
But yeah, and also changing competitive intensity. Sorry, yeah, go ahead, Mukul.
Also, there have been certain cost initiatives on the content side, which has led to certain savings, which we expect to continue.
Okay, thanks. Is there any change in competitive intensity in the market?
I would say it is somewhat higher than what we saw in the last quarter.
Okay. Okay, okay.
Particularly on the handset side.
Okay. Okay. Okay. Thanks. And you had announced the promoters would support Vodafone Idea to the extent of INR 2,000 crore. Is there any update on this? And, you made a payment of INR 1,700 crore to government recently. Did you get any funding from the promoters?
No. So in the last quarter, we had gotten a letter from the promoters that they will support us to the extent of INR 2,000 crore. I mean, till date, they have not actually contributed anything. We had gotten some bank funding to tide over the short-term mismatch that we had in the last quarter. The promoters' commitment is there. They have said that they will support as and when required, and we expect that this promoters' contribution should also come alongside the tie-up with the external investor.
But is that subject to external funding coming in, or even without that, the INR 2,000 crore will come?
No, it is not, it is not subject to that, but the expectation is that both can happen together, but it is not subject to that. Most likely, this will conclude in this quarter.
Okay, okay.
That's our expectation, yeah.
Okay, okay. Any impact of Jio Bharat that you've seen so far?
Actually, not very much, and I think the best indicator of that would be that, let's say, this was the quarter where we did most of our intervention of changing the entry-level pricing. And that would probably have been a factor, because the Jio Bharat phone was targeted more towards the people who were on entry-level pricing or, let's say, who were from Jio on the non-unlimited plan. So if that was going to have any significant impact or any impact at all, I think it would have reflected in some impact on as we took the changes in the entry-level price. Since that has not happened, that is one very clear indicator from an external perspective, but let's say this is not a subject of discussion anymore, because it's not had any impact, so to say.
Got you. And lastly, on the Supreme Court decision, would you be looking to contest it, or you think it does not really have any meaningful cash impact to, like...
We are evaluating that, and we take some time on this.
Okay. Okay, okay. That's it for me. Thank you very much.
Thanks, Kunal.
Thank you. Our next question is from the line of Himanshu Shah from Dolat Capital. Please go ahead.
Thank you, sir. Thanks for the opportunity. One question, we have went back to Supreme Court filing a curative petition with respect to the differences or errors in the AGR liability. Just want to understand, what is the difference that we are envisaging, and why we are going back after almost a gap of 2.5 years since this amount was crystallized for the last Supreme Court judgment?
Okay. Before I answer this question, let me just say that the matter is before the Supreme Court, and so any response that I'm giving should be seen in light of the fact that this is... I'm just trying to provide as much clarity and information on the subject, but ultimately, the final result will be what the court decides. Having said that, if you remember that we have been at multiple times saying that there are errors in the demands, and the Supreme Court judgment, which was given in 2020, had kind of mentioned that the demand, which was captured in the affidavit filed by the DoT in the court at that time, where this information was sought, was kind of fixed, although DoT in their own filing the affidavit, they have said these are provisional in nature.
Now, post that, we had filed a review petition against the judgment of October 2019, which was disposed of, and then we had filed another review petition post the judgment of 2020. This was filed in 2021. That review petition has not been disposed of, and since that was taking some time, we thought that at this point of time, it would be best to file a curative petition, because looks like the review petition, one was rejected. In any case, we had to address that, and the other one was not progressing. So one thought earlier was that let us, both the review petitions be disposed of, they were relating to the same matter, and then file the curative. But since that was taking some time, we finally decided that we should file the curative petition.
In terms of, the fact that, there were errors in demand, this has been a matter of public knowledge. In fact, when the judgment was announced, DoT had asked us to do a self-assessment exercise, which was then kind of, not proceeded with, because that was the court direction. We had also filed our figures of self-assessment and all. So it is clear knowledge that there are some errors in those demands, and we have requested the Supreme Court to, allow the DoT, that if there are any errors in these demands, they can be corrected, because I don't think any, government would like to, recover demands which are not right. The second, prayer in the curative petition is also seeking waiver of, penalty and Indus thereon.
The rationale for this is that, since the time the last judicial pronouncement of this was given by the tribunal, I think somewhere in 2015, the matter was largely decided in favor of the industry. So really speaking, there was no opportunity to pay, because the matter was decided in favor of the industry, largely. And at that time, TDSAT had directed the DoT to issue fresh demand based on the TDSAT judgment at that time. However, since DoT had gone into appeal in Supreme Court, they had not raised any revised demands at that point of time. So basically, the intention of the service providers is that there should not be any penalty levied. Interest itself is, the time value of money is being covered by that, and in this case, the Indus itself was penal in nature.
So in summary, there are two prayers. One is allow and direct the DoT to make correction in the demands which they have provisionally raised earlier, and secondly, waiver of the penalty and Indus on penalty thereon.
Sure, sir. This is very, very helpful and very clear. Just a small follow-up on this. Are there any timelines to the... Will there be any kind of hearings on the curative petition, or the court will just review the filings and basis that they will unanimously decide on the curative petition, whether to go, give any kind of a revision or not? This one one. Are there any timelines with respect to the curative petition outcome?
Himanshu, I'm not an expert on the subject, so don't hold me to what I'm saying, but my best understanding today is that, first, the court has to decide whether they will admit the curative petition or not, and that is the first decision to be taken. If it is decided that it will be taken, our sense is it would most likely be heard in the court, but I'm not sure about that. In terms of timelines, I think we cannot comment on the timeline. That is for the court to decide.
That's very, very helpful. Sir, can I have one more question?
Sure, sure. Go on.
So, with respect to one, equity funding from external parties, and whether you can provide on the quantum of fundraise that we are looking for from external parties?
I think, Himanshu, while we are working on specific figures, given the nature of these discussions and the sensitivity around them, I would avoid answering that question at this point of time.
Yes, okay.
Let me just, let me just put it this way, if it is of any help, that we have a business plan with an investment plan, and basically, the total equity plus bank funding that we are targeting is of a nature that we should be able to use that funding to make the investments, and then improve the operations to a point, where the balance sheet of the company is addressed to an extent, that we then become self-sufficient, both in terms of cash generation from business, being able to meet our requirements largely, and if there is any gap, to be able to raise new funding. So all that I can say is that we are looking at an overall funding which will meet our requirements, where currently our cash generation is less, till we get to a point of self-sufficiency based on our projections.
... This is very, very helpful, and all the best for the curative petition on the five days. Thank you, sir.
Thank you so much.
Thank you. Our next question is from the line of Ali Asgar Shakir from Motilal Oswal. Please go ahead.
Yeah, thanks a lot for the opportunity. First question was on your network coverage. So while, you know, I see your coverage both in terms of population coverage as well as, you know, connected towns have, you know, improved or, you know, at least remains stable. But your unique sites have, you know, to some extent, although very little, but kept reducing. Are these overlapping sites therefore that we are reducing? Because also your total broadband sites have reduced. Or how should we see, you know, going forward in terms of the unique site coverage expansion?
So I would put it like this: I think the real figure to be seen in terms of network coverage is the network coverage in terms of population, which is improving. The point you are mentioning is mostly technical. What is happening is a lot of 4G is coming out of a 2100 frequency band being deployed for 4G. So let us say that if in a particular circle we had deployed some 2100 for 4G already, but we're using one carrier of 2100 for 3G, because that was the need based on the 3G devices in that location or in that circle, that would be construed as one 3G site in 2100 and one 4G site in 2100.
Now, if that spectrum is reformed to be used completely for 4G, then what you would see is that the number of 4G sites remains the same, but the number of 3G sites reduces. So what is happening is in the overall broadband sites would show a non-reduction. So that part is not only technical, I think our capacity has been constantly increasing, our coverage is increasing, though marginally, and this reduction in broadband sites is more technical because of what I explained to you.
Understood. This is very clear. What about the unique towers? Although that has reduced by a very little amount, but that has also been, you know, reducing every quarter. So how would I, how it should, how should we read that?
So let me answer that, based on what I can tell you, and if there's anything that, Murthy or Asit would like to add, they can do so. One of the reasons is that, currently we are not rolling out new physical sites, except very few, and some of these sites which are getting closed down are also because of landlord issues or those kind of issues. So some closures keep happening for that reason, and I think it should be largely representative of that reason, unless Murthy wants to add something on that note.
So, if you look at these numbers on a quarterly basis, there's hardly any difference, but except for a few, and that, I think, is just normal.
That must be because of these, either because there is some safety concern which government authorities kind of say, "This has to be closed," or there is any landlord issue, then the landlord says that, "Hey, we don't want to continue with that site." I think a minor reduction is happening probably on that count, and since our new rollout is minimal at this point of time, you may be seeing a decline. This closure of sites happens with everyone, but because they rolled out more sites, so it may not be appearing so in the other places.
Got it. This is clear. Second question is on the, you know, subscriber churn and dilution. While you did emphasize that, you know, you may have not seen as much impact in the low subscriber category because of the competition, but more so because of the revision in the price plan that you have done. Having said that, you know, 4G subscriber base has seen improvement. So, if you can just, you know, give us a overall perspective in terms of dilution, where are we seeing this? Is it mainly only in the lower ARPU category and premium segment we are gaining customers, or how should we look at this? If you can just shed some light.
So let me put it this way, that while in this quarter we have had a price intervention, generally speaking, post December 2021, there has not been any significant price intervention, except this one, where we changed the entry-level pricing. And if ARPU is improving in that scenario, it is based on some interventions and upgrade of subscribers. So it is very clear that on an overall basis, the subscribers are getting added to the higher ARPU category. In terms of churn, you are right that we are seeing most of the churn at the lower ARPU category, and some of it might have also been accelerated by the change in entry-level price. So I think that loss of subscribers is happening at the lower ARPU segment.
I don't know, was this your question and have I answered it, or you're wanting to understand something?
Yes. Yes. So, point is basically at the premium end, we have been able to more or less protect the customer base.
That's, that's right. And as I said, I mean, in this quarter, we have also seen after a fairly long period of time, we've seen an overall decline in the number of subs and also a net addition in the postpaid phones. That's a marginal number, but that has happened after a long period of time, and that clearly shows that in terms of attractiveness of our proposition, as far as subscribers are concerned, we are moving in the right direction.
... Got it. And just last bookkeeping question. So, we have about INR 7,174 crore of debt, which is coming up due before thirtieth of September, right? 2024. So would you be able to share, is this entirely coming on the thirtieth or it is coming in tranches, and what are those dates? And, is this, you know, bank debt or are there any government obligations also part of this?
Let me try and answer to the extent I can, and then Murthy can add on to that. So firstly, this is spread over a period of time. Secondly, this probably also includes some figures, which may be, but I think this is excluding the covenant breach-related reclassification. This also includes, I think, INR 1,600 crore of OCDs, which were issued to ATC. And if those get converted, then this will not need to be serviced. So that is one part. The rest is bank debt, which is spread over, which is in the nature of amortizing debt.
I think the one main figure would be that there is INR 2,000 crore of debt, which we had taken in the quarter gone by, as we said, for taking care of the short-term funding gap, and that will be repaid in next quarter, which is due for FY 2024. So that is a larger debt servicing. Otherwise, the remaining debt is more of an amortizing nature.
Okay, understood. Thank you so much.
Murthy, is that right, that 7174 includes the OCDs of ATC?
I think so, yes. That’s right.
Okay. So the rest of the nearly INR 5,500 crore is coming and spread across different periods of the year, right? And out of that INR 2,000 crore, as you mentioned, is one tranche, which will come in Q4.
Yeah, that is a single large tranche. The rest of it is mostly amortizing.
Got it. Thank you.
Thank you. Our next question is from the line of Santosh Sinha from Emkay Global. Please go ahead.
Thanks for taking my question. My question is regarding this 822 crore tax charge post the Supreme Court judgment. So how judgment will actually impact the PNL going forward? That is my first question, and the second is regarding any major cash payment that has to be done in 12 months. These are two, my two questions.
So, let me take this question. The first is that, you see, what the Supreme Court said is that the revenue share license fee, the tax, tax allowability of that, would be in line with the upfront license fee that was paid at the time of acquiring any license. And since that’s happening now, then what will happen is that if you take a 20-year period of a license, then in that case, you know, you, you-- one would tend to get 120 in the first year, 119, plus the 120 in the next year. So it’s basically a burgeoning waterfall that will happen. In the second half of the license period, you, one gets, you know, a better, you know, tax allowability as compared to the first half of the license period.
As we are concerned, given that we are into losses, this is a one-time charge for the past years, until such time that we, you know, we get back to profitability. While the taxable computation would obviously be a little lower than your book loss, it does not, you know, result in any tax outflow. This would probably, possibly affect, you know, organizations and entities which have a taxable profit, because to that extent, their another book profit, because to that extent, the taxable profit would be higher.
Okay.
Hello? Hello, hello. I answered your question?
Yeah, that was helpful.
Yeah.
Thank you. So do you have any other questions, Mr. Sinha?
No, that was it. Thank you.
Thank you. Our next question is from the line of Sohan Joshi from ASC Consultants. Please go ahead.
Am I audible, sir?
Yes.
Yes, you are.
So just one confirmation. In one of the previous question, you said that you'll since you have a good amount of cash now available because a sizable chunk of the debt has been paid, and you will be clearing the outstanding dues of the vendors. So is it that that before receiving those external funding and promoters funding, we are targeting a certain higher percentage for clearing the vendor payments so that the balance funding will then be entirely deployed for the growth CapEx only?
So let me put it this way, that, whenever anybody is providing, capital today, the basic driver of that, capital is that it should be invested in growth CapEx, because that is the main reason why the lack of investment is preventing our ability to compete in the market, primarily the lack of 4G coverage. So any new funding which is coming either from equity or from banks, the main objective of that funding is growth CapEx. However, given the fact that, we have, accumulated some vendor overdue, and which is also happened somewhat because of the fact that we have continued to pay the bank debt, on schedule on a regular basis.
We are in discussion with our funding providers that some part of that we earmarked to clear the part of the vendor overdue, and the rest will be cleared over a period of time out of the internal cash generation.
Okay, that was helpful, sir. Sir, the second question, we have a significant stake in one of the vendor entity. So up to last year, there were plans that we might plan to sell up some stake in Indus. Is it that we might go ahead next year to sell out some of the stake in Indus, or we'll continue the current capital allocation only?
No, no. So I think Vodafone Idea does not have any stake or Indus. That stake or Indus is led by Vodafone Group.
Yeah. Vodafone plc.
I cannot comment on behalf of Vodafone plc. That is a question that can only be answered by them.
Okay, okay. Okay, sir. That's it. That's it from my end.
Thank you. Ladies and gentlemen, that was the last question of our question and answer session. I now hand the conference over to Mr. Akshaya Moondra for closing comments.
Thank you, Zico. With improving operations, we saw the lowest quarterly decline in subscribers post-merger. We have reported nine quarters of sequential growth in our 4G subscribers. We remain focused on providing competitive data and voice experience at locations we are, where we are present, and are building a differentiated digital experience, adding several digital offerings in the recent quarter. Our share in gross customer addition continues to remain higher than our customer market share for the last several quarters, clearly reflecting our ability to compete in the market once the investments are in place. We continue to engage, remain engaged with our lenders for further debt fundraising, as well as with other parties for equity or equity-linked fundraising to make required investments for network expansion and 5G rollout to compete effectively.
We have been improving our performance with limited investments, and we are very confident that with the investments coming on stream, we will be able to make more meaningful improvements in our overall performance. Thank you all for joining us on this call. Have a very good evening. Thank you.
Thank you. On behalf of Vodafone Idea Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.