Vodafone hit by Jio, note ban pangs

The demonetisation move and pricing pressure from Reliance Jio in the India market resonated at the third quarter earnings of London-based Vodafone on Thursday. India revenues of the UK telecom major dropped by 5.5 per cent to 1.45 billion euros in the quarter ended December 2016 from 1.53 billion euros during the same period in the previous year.

In a statement after the Q3 results, Vittorio Colao, group chief executive, said data traffic continued to grow strongly in Europe but slowed in the Africa, Middle East and Asia Pacific (AMAP) regions, citing ‘’impact of free services by the new entrant in India’’ as a reason. “Our strong organic performance in South Africa and Turkey was partially offset by India, where the sector is affected by free services from the new entrant,” Colao said. He did not name the competition however.

The company’s outlook for the next quarter has also factored in freebies being offered by Jio. “We anticipate intense competitive pressure in India in the fourth quarter and are taking a series of commercial actions, including the extension of 4G services to 17 leading circles,’’ the CEO said. The company referred to its announced earlier this week of a proposed merger with Aditya Birla group’s Idea, while elaborating plans on commercial steps to take on competition in India.  

Mobile phone customers in India increased four million over the period, giving a closing customer base of 205 million. Voice revenues declined as the benefit of higher incoming volumes and a larger customer base was offset by lower usage per customer and a four per cent year-on-year decline in voice prices. 

Data browsing revenue growth in India slowed due to the impact of free services from Jio that led to a quarter-on-quarter decline in the company’s active data customer base to 65 million, from 69.6 million in the previous quarter.

Jio announced free voice and data services from September 5 to December 31, 2016, and is yet to charge customers. In another development that hit the telecom industry, during the December quarter, the Narendra Modi government declared high-value currency notes invalid. The move sucked out liquidity from the market and impacted industry revenues.

In fact, Vodafone had recorded non-cash impairment charge of 5 billion euros during the first half of the financial year ended September 30, 2016, in relation to its Indian unit. The company had attributed the write-off to Mukesh Ambani-led Reliance Jio’s tariff plans.

On January 30, Vodafone confirmed it was in discussion with the Aditya Birla Group about an all-share merger of Vodafone India (excluding the 42 per cent stake in Indus Towers) and Idea.