Network investments, low tariffs hurt industry health: Voda Idea

New Delhi: Network investment costs to provide for exploding data demand and unsustainably low tariffs are the reasons for poor financial health of the telecom operators in India, Vodafone Idea said in its annual report for last fiscal.

Despite improvement in average revenue per user (ARPU) as a result of December-19 price increase and continued migration of 2G/3G users to 4G, “tariffs are still unsustainably low despite offering much higher value compared to past, and thus Financial Year 2019-20 revenue remains lower compared to five years ago,” the company said in its report released Monday.

“This coupled with massive investment requirement due to exploding data demand is leading to operators continuing to make losses.”

Amid several headwinds in the financial year gone by, the median renumeration of Vodafone Idea's 11,485 employees has gone up by 10.7%. As per the report, the median renumeration of the employee was Rs 10.65 lacs.

Among key managerial persons, the company's CFO Akshaya Moondra drew a salary of Rs 5.24 crore up 46.4% on-year. MD and CEO Ravinder Takkar who took over the position in August last year does not draw salary from the company, the report said.

The company had reported a staggering Rs 73,878 crore of net loss for fiscal ended March 2020 - the highest ever by any Indian firm - after it provisioned for Supreme Court mandated statutory dues. The Indo-UK telecom JV has never posted profit since merging in August 2018.

It reported net loss to Rs 25,460 crore for the June quarter after making additional provisions to pay past statutory dues, and had, at that point, said its ability to continue as going concern hinges on the Supreme Court allowing more time to pay dues.

The apex court last week allowed a 10-year payment period for the telcos to stagger their statutory dues beginning March 2022. Vodafone Idea, which welcomed the court’s judgement, has to pay close to Rs 50,400 crore to the telecom department.

The country’s number 3 telecom carrier said that the government must provide interim support by implementation of floor pricing and reducing the several regulatory levies for operators to generate returns on their investments.

Telecom industry body had on multiple occasions pointed out that the sector which offers cheapest services in the world is weighed by multiple taxes and levies. It pays Rs 30 to the government for every Rs 100 earned, making it among the most taxed in the world.

Vodafone Idea is hopeful that the telecom regulator will provide the much needed support to the sector in the form of floor pricing.

“This is essential to address the structural issue faced by the sector, and enable operators to generate returns on their investments and revive the overall health of the industry,” it said.