The COVID-19 pandemic has touched every aspect of our lives across theworld. It has altered mindsets perceptions and strategies for businesses and beyond. Ifthere is one abiding lesson it is that sustainable growth and development involvesholistic nurturing of human natural and financial capital. 2020 is a year that will onlygain in significance when viewed through the perspective lens of time.
The world has been fighting the COVID-19 pandemic for more than a yearnow and the struggle has had deleterious economic effects. In 2020-21 the global economycontracted by 3.3% the largest contraction on record at least since World War II. Muchof it was concentrated in the first half of our fiscal year FY21 as several countriesenforced strict lockdowns. Economies bounced back - albeit at differentiated speeds - insubsequent quarters on the back of large fiscal stimulus packages especially in thedeveloped countries restocking demand after dilution of lockdowns and improvedconfidence levels following the start of vaccination programmes. As per the recentforecasts from International Monetary Fund (IMF) the US and China are expected to recorda strong recovery in 2021 resulting in a net positive expansion of their economies overthe 2019 levels. These two engines of growth are expected to boost demand for exports fromother countries. Even the other two large economies the EU and Japan are expected toexpand.
In response to the pandemic central banks resorted to stronglysupportive monetary policies in most developed economies causing interest rates to godown to record lows. At the same time another consequence of this policy has been asurfeit of liquidity. That has led to a strong rally in prices of many industrialcommodities which has also been supported by the evolving economic recoverystimulus-related demand expectations and certain supply-side disruptions. This has causedinflationary pressures on the cost dynamic of several manufacturing industries.
The latest IMF forecast suggests a strong 6% growth in global GDP in2021. But the occurrence of second and third waves of COVID in different parts of theworld and reports of virus mutations have created downside risks to the outlook of astrong growth rebound. Recovery remains uneven and uncertain with the extent of fiscalsupport and level of vaccination being key differentiators of the short-term economicoutlook across countries.
Indian economy which was firmly on the path of recovery in the secondhalf of FY21 was hit by a rather unexpectedly virulent second wave of COVID-19. Thatcaused a severe strain on healthcare facilities in many parts of the country leading tolocalized lockdowns and a fall in mobility to levels seen a year ago. This may lead tosome reassessment of growth estimates for FY22.
As a silver lining disruptions to production and supply chains havebeen far less severe during the second wave than during the first wave. Vaccinations arepicking up pace which would support faster normalization of mobility levels and ofrelated economic activities. Continued accommodative monetary policy of the RBI and theexpected increase in capex from the Government are factors that will support growthrecovery. In addition global growth prospects provide us with exports as an additionalstrong driver of growth.
The longer-term prospects for the Indian economy continue to be robust.Various initiatives including privatization of public sector enterprises monetization ofassets implementation of National Infrastructure Pipeline targeted investment incentivesthrough the Production-Linked Incentives Scheme and the new Labour Code are likely tospur a virtuous cycle of investments and growth in the medium-term.
Your Company's Performance
The merger of Vodafone India into your Company effective from August31 2018 led to the creation of Vodafone Idea Limited a partnership between two strongpromoters Aditya Birla Group and Vodafone Group. Post-merger your Company is one of theleading telecommunication operators in India offering voice data business services andother Value-Added Services ("VAS") including Short Messaging Servicesdigital services IoT etc. As of March 31 2021 the subscriber base of your Companystands at 255.7 Mn (on VLR) with subscriber market share at 25.7%.
Through the course of FY21 the operating environment continued toremain challenging due to unsustainable pricing and hyper competition which were furtheraggravated by the COVID-19 pandemic. Your Company played a critical role providinguninterrupted connectivity to millions of people enabling them to work study transactinteract and get the daily dose of entertainment from the safety of their homes. Whilethe operating challenges remain increasing digital penetration which has got a furtherboost during the pandemic remains a massive opportunity for telecom industry especiallywhen the pricing revives in future. Increasing content consumption especially throughvideo and social media usage is driving strong demand for high-speed internet. YourCompany with strong spectrum portfolio large network investments in the form of networksites and optical fiber wide distribution reach and strong customer affinity is very wellpositioned to benefit from this trend.
During FY20 your Company had successfully completed the integrationexercise and fully realized the targeted synergies at a record pace in comparison with anyglobal mergers especially given the size scale and complexity of the integration. YourCompany's primary focus in FY21 has been on focused network investments to ensure superiorcustomer experience. Your Company has expanded its 4G population coverage to over 1billion and significantly improved its capacity. Your Company's relentless pursuit to havethe best 4G network through integration and incremental network investments post-mergeris clearly visible through the top rankings across various third-party reports on bothdata and voice. As per Ookla the global leader in Internet Performance Testing ViGIGAnet 4G network remained the fastest 4G network in the country for 3 consecutivequarters (from Q2FY21 to Q4FY21). Your Company also had the highest rated voice quality inthe country as per TRAI's "MyCall" app data for 6 months consecutively betweenNovember 2020 and April 2021.
Your Company continues to focus on driving 4G penetration to increaseARPU. Your Company launched the new unified brand VI on September 07 2020 whichleverages on the legacy of two of the most loved brands of the country - vodafone and idea. Your Company has also been focusing on digital-first approach digitizing all customertouchpoints as well as distribution channel. Further your Company remains focused onstrengthening its position on business services especially the new and fast-growingsegment of IoT and cloud services. Your Company continues to focus on its platformcapabilities to offer deeper integration with its partners for a differentiatedexperience create monetization opportunities and truly become an integrated digitalservice provider. Your Company has also undertaken cost optimization exercise to achieveRs 40 billion additional annualized cost savings of which it has achieved 65% on a runrate basis by the end of FY21. All these initiatives will improve revenue andprofitability and subsequently strengthen your Company's overall competitive position inthe market.
Your Company continues to focus on execution of its stated strategy.Your Company has made significant 4G investments and continues to expand its coverage andcapacity further. All the ongoing strategic initiatives will ensure that your Company willcontinue to provide the best of customer experience to retail and enterprise customers andhelp in creating an agile and future-fit organization.
These have been challenging times for the country. Going forward yourCompany hopes that COVID related disruptions will be behind us due to the ongoingvaccination drive and the economic activities continue to pick-up in the coming months.Your Company is well aware of its duty and the critical role it plays to keep the nationconnected and it remains committed to help its employees customers vendors and all thepartners in every way possible. Your Company will keep striving to provide uninterruptedservices while maintaining exceptional quality of services.
This is a difficult phase for the Vodafone Idea family as well. TheSupreme Court vide its order dated July 23 2021 rejected the modification applicationfiled by the Company and other operators requesting to allow DoT to correctmanifest/clerical/arithmetic errors in the computation of AGR demands. Subsequently onAugust 10 2021 the Company has filed a review petition against the order dated July 232021 which is pending for outcome.
Your Company is disappointed by the verdict and will take further legalrecourse as appropriate. Your Company believes the government recognizes the criticalityof the sector and the importance of retaining healthy competition amongst private sectoroperators. Your Company's robust wireless digital infrastructure covering 1.2 billionpopulation for mobile telecommunication services has played a key role in nation buildingand is critical for the country's Digital India Mission. As the industry continues toremain under unsustainable financial duress your Company is hopeful that the governmentwill provide the necessary support to address all structural issues faced by the sector.Your Company with a history of providing 25 years of mobile services to the country ishopeful that the government will support its efforts to generate reasonable returns ontheir massive investments. Therefore while the Company awaits the final Government'sdecision it will continue to remain focused on providing quality service to the customersand sustain intensity in the market.
|Yours Sincerely |
|Himanshu Kapania |