London: British telecom major Vodafone on Tuesday posted over two-fold increase in losses at 5 billion euros, or Rs 37,382 crore, in the first half of the fiscal ended September, due to impairment of non-cash assets of Indian arm impacted by stiff competition, primarily from Reliance Jio.

Vodafone reported a loss of 2.34 billion euro in the same period a year ago. The company has also deferred plan of going public in India due to unfavourable market condition.

“We recorded a non-cash impairment of 5 billion euro, net of tax, in the period relating to our Indian business. This was driven by lower projected cash flows within our business plan as a result of increased competition in the market,” Vodafone said in its financial statement.

Reliance Jio is offering free unlimited 4G mobile broadband service till December 31, 2016 and unlimited free voice call and roaming service for lifetime.

India’s three big telecom players Bharti Airtel, Vodafone and Idea Cellular are being challenged by new entrant Reliance Jio, backed by Reliance chief Mukesh Ambani.

“The Group intends to proceed with an IPO of Vodafone India as soon as market conditions allow. We do not expect this to take place during the current financial year,” Vodafone said.

The Group’s operating loss was 4.7 billion euro, compared to an operating profit of 1.1 billion euro in the prior period, due to the 6.4 billion euro gross impairment charge recorded in respect of the Group’s investment in India and lower EBITDA, it added.

During the six months ended September 30 2016, Vodafone recorded an impairment charge of 6,375 million euro in respect of the Group’s investment in India which, together with the recognition of an associated 1,375 million euro deferred tax asset, led to an overall 5 billion euro reduction in the carrying value of Vodafone India.

The impairment charge relates to goodwill, other intangible assets and property, plant and equipment, Vodafone said.

“A new entrant has recently launched free trial services for an extended time period and commercial price plans that were at a significant discount to prevailing market pricing, resulting in competitive responses from other operators. This has created a high degree of uncertainty over a range of commercial planning assumptions including future pricing, profitability and market structure,” Vodafone said.

Vodafone India’s revenue during the reported period declined by about 2 per cent to 3015 million euro from 3086 million euro. In local currency terms, Vodafone India revenue marginally increased by 3 per cent to Rs 22,654 crore in first six months ended September 30, 2016 from Rs 21,987.7 crore a year ago.

Vodafone India revenue declined at 1495 million euro in second quarter ended September 30, 2016 compared to 1505 million in corresponding period a year ago. However, revenue in local currency terms was up by about 2 per cent at Rs 11,170 crore from Rs 10,878 crore during period under review.

Average revenue per user of Vodafone India declined by 3.8 per cent to Rs 170.8 in quarter ended September 30, 2016 from Rs 177.7 in same period of previous fiscal. Vodafone India reported 200 million mobile customers at the end of reported period.

“Our active data customer base at the period end was 69.6 million. Overall, data pricing declined 14 per cent year-on-year, while data usage per customer continued to grow strongly to 504MB. Our 3G and 4G customer base continued to grow to 36 million,” Vodafone said.

The company has made capital investments of Rs 3,356 crores in first half of current fiscal mainly in new site roll-out to deliver superior customer experience and growth in key focus areas.

Vodafone India mobile internet revenue grew by 18.8 per cent to Rs 4,617 crore at the end of reported first half compared to a year ago period.

The company paid around Rs 20,300 crore for buying spectrum in India to strengthen its market position and installed 4,100 new 3G sites taking the total tally to 63,000.

The company has 13,000 mobile sites for 4G services.

“In India, following the Indian spectrum auction in October in which we increased our total spectrum holding by 62 per cent, we now have a strong position to support our future 4G needs. We plan to extend our 4G footprint from 9 to 17 circles by the end of the current financial year,” Vodafone said.PTI

 

Key Financial Highlights: Vodafone India Standalone figures

Solid Financial Performance

• Continued revenue growth; service revenue of INR 22,579 crores in H1FY17 vs. INR 21,321 crores in H1FY16, a growth of 5.9%
• Revenue performance driven by customer additions, robust ARPU and continuous growth in data revenues
• EBITDA at INR 6,704 crores in H1FY17 vs. INR 6,534 crores in H1FY16; EBITDA margin at 29.6%, led by higher data revenue and scale benefits
• Strong Operating Free Cash Flow (OFCF) at INR 3,307 crores in H1FY17 vs. INR 2,922 crores in H1FY16, a growth of 13.2%
• Ongoing capital investments of INR 3,356 crores in H1FY17; (Capex intensity of 14.8%) driven by significant investments in new site roll-out to deliver superior customer experience and growth in key focus areas

Good Momentum in Operations

• Crossed the significant milestone of 200 million customers (200.7 million, growth of 6.7% YoY) serviced through a network of ~140,000 total sites, of which 75,854 are 3G/4G sites
• Substantial rural presence with a customer base of 106 million in H1FY17 (53% of total customer base)
• Consistently growing Revenue Market Share (RMS) at 22.5% (Q1FY17); gain of 0.6ppt QoQ
• Service Revenue ARPM at 48.7 paise and Voice ARPM at 32.1 paise (both Q2FY16)
• Robust Service Revenue ARPU at INR 186 in Q2 FY17; supported by good quality of subscribers with active subscriber base (VLR) at 94.8% (Sep’16 exit)
• Strong performance by strategic business areas with Data (Browsing) revenues contributing to 20.8% (Q2FY17) and Vodafone Business Services now contributing to around 16.4% of Service revenues (both H1FY17)

 

Vodafone Business Services (VBS) – a Robust, fully structured, Total Telecommunications Service Provider

• VBS growing at double the industry growth YoY, led by strong growth in fixed line and in SME business
• Making strong foray into Internet of Things (IoT) solutions and investing in Cloud Infrastructure
• Actively engaged with Public Sector Enterprises and State Governments contributing to the vision of Digital India and setting up of smart cities

 

Robust Performance in Data Driving Growth

• Data (Browsing) revenue at INR 4,617 crores in H1FY17, 18.8% growth YoY
• Continuous uptake of Data with 47.5 million Data users with greater than 1MB usage (Sept ’16 exit)
• 51% growth in 3G/4G users to 35.9 million (Sept 16 exit) from 23.8 million (Sept 16 exit), reflecting the focus on mobile broadband
• 3G and 4G revenues grew by 36.2% YoY, contributing to over 72% to data (browsing) revenue and volume in H1FY17
• Data usage/sub (for users >1MB) at 745 MB/month (Q2 FY16)
• Data ARPU (for users > 1MB) at INR 164 in Q2 FY17 vs INR 158 in Q2 FY16
• Data usage and revenue growth led by higher smartphone penetration at 34.5% of total customer base, growth of around 6pp YoY (Sept ’16 exit)
• Driving data usage with innovative value propositions (such as Vodafone Flex and Vodafone U) and better customer experience in addition to strategic partnerships with handset manufacturers and application providers.

M-Pesa, a new currency for India – Driving Financial Inclusion

• Pan-India footprint, largest business correspondent in the country with around 129,000 authorized agents (equivalent to all bank branches in India, Sept ’16 exit)
• A base of over 8.4 million registered customers of which 1.8mn are active users
• M-Pesa App with over 1.4 million downloads acting as a key business differentiator, to enable convenient payment of bills & recharging on the move
• Engaged with Government bodies and enterprises enabling financial inclusion and e-commerce

o  M-Pesa pension disbursements in Haryana to retired Government employees

o  Tie-up with Rajasthan Grameen Aaajeevika Vikas Parishad (RGAVP) to empower women in Village Orgn/Self Help Groups

o  Several new enterprise mandates won across industry verticals

• RBI’s in-principle Payment Bank license will enable Vodafone M-Pesa to offer a more comprehensive portfolio of banking and financial products and services, accelerating India’s journey into a less cash economy

 

Spectrum Auction Highlights

• Biggest winner in the October 2016 spectrum auctions  – acquired a total of 365.2 Mhz of spectrum
• Acquired high-capacity, multi-band 4G capability across – 1800, 2100 and 2500 MHz.
• 4G footprint to be expanded to 2,400 towns and across 8 additional circles by March 2017
• In a very strong position competitively with this spectrum purchase:

o  91% of total revenues & 95% of data revenues are covered with 4G spectrum

o  In the key markets, 75% of data revenues covered with 3 or more LTE carriers

Other Highlights

• Launched Vodafone SuperNet^TM, our best network ever across the country to offer superior voice and data experience
• 4G services on the superior 1800 MHz band launched in 4 new circles (Gujarat, Haryana, UP East, West Bengal)
• Launched Vodafone Flex – a revolutionary new concept in prepaid segment eliminating the need for multiple recharges or validities- Enjoy voice, data, SMS and roaming – all with one single recharge, customised for individual usage
• Launched ‘Vodafone ‘U’ – a unique lifestyle proposition for Young Indians – a dynamic proposition, perfectly poised to be the ‘Connector’, ‘Enabler’ and ‘Entertainer’ by offering a wide array benefits, delivered digitally and accessible via the mobile to stay always connected with friends, fun and the internet.
• Offered delightful data experiences with Double Data benefits on New Vodafone RED Postpaid plans and up to 67% more data on prepaid packs
• Launched India’s best International Roaming plan for worry free roaming across 34 countries – free incoming calls, outgoing calls @ just Rs. 1/min and data browsing at just Rs.1/MB
• First to roll-out e-KYC led paperless process pan India – customers walk out connected in minutes

Awards and Recognitions

• Won the Best Overall customer Experience award in Telecom category  at Quest CX Awards 2016 jointly organised by OneDirect and Twitter (April 2016)
• VBS recognized as ‘Best Enterprise Service Provider – SMB’–Frost & Sullivan Telecom Awards 2016
• Vodafone M-Pesa won the Best Payment Wallet Initiative at the Emerging Payments Awards 2016 in London for it Mobile Wallet. (Oct 2016)
• SuperNet #BeSuper campaign won the best campaign for the year in the Telecom/IT/Ecomm/Apps section at the IndIAA Awards organized by the Indian Chapter of the International Advertising Association. (Oct 2016)

 

Sunil Sood, Managing Director and CEO, Vodafone India commented:

“Amidst a dynamic environment, we delivered a solid performance. We are well prepared for the increased level of competitive intensity that we are experiencing. We have strengthened our customer value propositions making Vodafone Play, your one window to the world of entertainment, launched exciting 4G offers – 9GB free on purchase of 1GB pack for new 4G handsets and revamped Vodafone RED for high end voice and data users. Further, we pioneered lifestyle propositions such as Vodafone U for young customers and Vodafone Flex, which allows customers to make a single recharge for voice, sms and data. We expanded our 4G footprint to 9 circles by launching services in 4 new circles. With the spectrum bought recently, we will roll out the Vodafone SuperNet 4G experience rapidly to 2400 towns and in 8 additional circles by March. We continue to invest to expand our modern and scalable network with a strong backhaul, to support the increasing volumes and need for speed from both retail and enterprise customers. We remain committed to fulfill the evolving needs of our customers and leverage our global experience plus rich understanding of India to play a meaningful role in enabling Digital India.”

 

Key Financial Summary

VIL standalone
INR crores	H1FY17	H1FY16	YoY%
Service revenue	22,579	21,321	5.9%
o/w Data browsing revenue	4,617	3,885	18.8%
Total revenue	22,654	21,404	5.8%
EBITDA	6,704	6,534	2.6%
EBITDA margin (%)	29.6%	30.5%
Capital expenditure	3,356	3,627
Capital Intensity	14.8%	16.9%
OFCF	3,307	2,922	13.2%

* Net Debt for Vodafone India standalone for H1FY17 is at INR 354 billion

 

Customers	H1FY17	H1FY16	YoY%
Mobile customers (million)	200.7	188.2	6.7
Data users (million) (>1MB usage)	47.5	42.6	11.4
Data users (million) (>0Kb usage)	69.6	66.5	4.6
3G+4G users (million)	35.9	23.8	51.1
Churn% (annualized)
Contract	20.1	21.1	(1.0)
Prepaid	59.6	55.7	3.9
Total	56.7	53.3	3.3