Voda-Idea says competition making market unsustainable, killing investments

No clarity on when the pricing situation will improve in the domestic market, says the company

Vodafone Idea, the largest telco by subscribers, said the market was "unsustainable" due to aggressive competition and warned that this was detrimental to the government's flagship initiatives, like Digital India.   

In his first interaction after the merger of the two companies, chief executive Balesh Sharma said on Thursday that all the three operators were burning cash and no one could expect them to invest in such a situation. 

Blaming the low Arpu, or average revenue per user, for the cash flow troubles that the domestic telcos face and the resultant underinvestment in the network, he said that in neighbouring China, the higher Apru made it comfortable for operators there to invest for the future. All three operators reported a massive drop in Arpu -- in the range of Rs 131 for Jio and a low Rs 100 for Airtel. 

He also said there was no clarity on when the pricing situation would improve in the domestic market.  

Sharma said the company was advancing the projected Rs 140-billion savings to come in from the synergies arising out of the merger by two years to FY21.
 

The company was undertaking a slew of initiatives, including better utilisation of towers, to achieve the synergy benefits, he said, adding that they would be investing Rs 270 billion over the next two financial years. 

It was also committed to pay Rs 30 billion towards spectrum fees and interest by March and Rs 120 billion in FY20, he said.

Vodafone Idea shares tanked seven per cent at Rs 41.45, bringing down its market cap to a low Rs 197.324 billion on the BSE, while the benchmark Sensex shed 0.62 per cent.