Over 10 years, everybody, especially Vodafone Idea will have to raise a serious amount of capital via the debt route or the equity route or they will have to consider a price hike to pay the AGR dues. What is your view?
Definitely the verdict is onerous and a 15-year or a 20-year time period would have been more palatable. But obviously even a 10-year does not bring a death knell today. It gives an opportunity for an operator to look at the next 10 years and work out what he wants to do and it is also probably good for the government because rather than writing off all the dues today, there is a fair chance that they will get it over 10 years.
Let us come down to the dynamics of the business. Obviously, the business that Voda-Idea is running requires a lot of cash infusion both to remain contemporary and competitive in the market place on current technologies and then to start planning about the future transformation into 5G and other technologies.
Both require tonnes of cash to sustain yourself but it also gives you an opportunity to reposition yourself because with the dynamics that prevail in the market today, Voda Idea does not seem to be contending for the number one position. If you do not contend for the number one or two position, but want to be amongst the top three players in the market, then there could be a more truncated strategy to follow.
Here the companies can go for lesser costs, raise prices and then choose the geographies where they want to deploy the cash and abstain themselves from areas that do not want to compete in. Those flexibilities will now come to turn though the caveat here is that when you look at the global scenario, the third player, even in high ARPU countries, really struggles for survival and does not make too much money.
But any situation for Voda Idea right now is better than the situation yesterday where there was a chance that they would have to shut shop today. At least that is not happening.
Rates going up in the Indian market is inevitable — be it Voda-Idea or Airtel or even Jio for that matter. Given an opportunity, everybody would like to get their ARPUs up by raising prices because to be serving 30 GB of data or at an average consumption 16-17 GB of data and realising less than Rs 200 for that cannot sustain any type of telecom business globally.
It is just a respite from closing down today but they will really have to work out their strategy and get funded either by debt or equity. To me, equity seems a bigger possibility than debt because it is a risk return ratio at the end of the day and there might be somebody who could be looking at an upside from there because of the current valuation of the company.
How inevitable is a price hike now? If a price hike comes through, Vodafone Idea will survive but Reliance and Bharti actually will hit a jackpot.
Yes a price hike was inevitable without this judgement. Now it makes it more imperative and they will definitely have to get more revenues from the same customers to survive and the supplies to Airtel as well. Why would Jio not want to raise prices? They are a debt free company. If they can get more revenues, their values will multiply many times. They have the advantage of a network because they have invested behind 4G and can further enhance their capability.
The entire fight between the operators who are left will be on the experience of the customers rather than on price, because price will bring in respite to all of them and it is survival for some and strategies for some. Price hike is absolutely inevitable in a market given that 5G is staring at you. We are postponing 5G by a year but we cannot postpone it indefinitely.
If we want to get there, we have to know what it takes to do a 5G. We will need a fiberised network and we will need a 100 MHz of spectrum. We will need used cases and customers who can pay up for those used cases. It is not a simple equation to solve. Let us see but the price alone, Voda Idea will have to get some equity infusion from somewhere to bridge their capability building on the network and be competitive in the market.