Vodafone net loss doubles due to competition from Jio

By Raaghav G R

Posted on November 16, 2016

The UK based Vodafone Group Plc. has reported a net loss of €5 billion (Rs. 36, 460 crores) in the second quarter that ended on September 30^th, 2016. Vodafone CEO said that the increase in Vodafone’s net loss was due to stiff competition from Reliance Jio. Its net loss during the second quarter last year (2015) was €2.5 billion (Rs. 18, 230 crores). “We recorded a non-cash impairment of €5.0 billion, 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 Group said in a statement.

Mukesh Ambani’s Reliance Jio Infocomm Ltd. had upped the ante against all of its competitors during September this year by offering cheap data and free voice services. This has caused all of its competitors including Vodafone, to cut data and voice call prices, thereby reducing their profitability. It has also delayed Vodafone’s plans to launch an IPO. “The aggressive pricing strategy of Jio will lead other operators to rejig their offerings to protect their respective subscriber market share. Reduction in tariffs along with porting of subscribers to the competition will impact the profitability in the long term”, said Rishi Tejpal, an analyst at Gartner Inc.

Adjusted operating profit of Vodafone India declined by 24.3% to Rs. 1,798 crores during the second quarter which ended on 30^th September this year from Rs. 2,375.98 crores during the same quarter, last year. The revenue of Vodafone from India dropped to Rs. 22,053 crores this quarter from Rs. 22,574 crores during the same quarter, last year. During September, Vodafone India received a funding of Rs. 47,700 crores from its parent company for business expansion. But it utilized most of that fund to repay its debts which then stood at Rs. 35,430 crores. “Competition in India has increased this year, reducing revenue growth and profitability”, said Vittorio Colao, CEO of Vodafone Group. “We have responded to this changing competitive environment by strengthening our data and voice commercial offers and by focusing our participation in the recent spectrum auction on acquiring frequencies in the more successful and profitable areas of the country”. Read more on Company Loses

Vodafone India had been planning to list on India’s stock exchange since 2010 but its plans had been put on hold by its parent company, due to stiff competition and its poor performance. 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. Vittorio Colao said that the scale of Jio’s operations in India is ‘unprecedented’ and that it is very hard to compete with someone who gives stuff for free. Vodafone India currently has a 4G presence in nine out of India’s twenty two telecom circles. It said that it would expand its 4G presence to seventeen out of India’s twenty two telecom circles by the end of March 2017. “In India, following the Indian spectrum auction in October in which we increased our total spectrum holding by 62%, we now are in a strong position to support our future 4G needs. We plan to expand our 4G footprint from nine to seventeen circles by the end of the current financial year, covering around 91% of service revenues and 94% of our data revenues”, Vodafone said. By the end of September, this year, Vodafone India had 200 million mobile customers. Despite a quarterly rise in its subscriber base, the company recorded a 2% decline in voice minutes, though data usage increased by 9.8% every quarter. Read more on Startup News

Vodafone net loss doubles due to competition from Jio