4G Data Costs Dropped By 90%, Voice Cost Declines By 58% in 18 Months: Vodafone Chief Executive

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4G Data Costs Dropped By 90%, Voice Cost Declines By 58% in 18 Months: Vodafone Chief Executive

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Reliance Jio entered the Telecom market in September 2016 offering freebies. This led to the shaken competitors into lowering their tariffs in an attempt to counter Mukesh Ambani led Jio’s moves.

Jio: The Disruptive Entrant

Sunil Sood, Chief Executive, Vodafone said that ever since Jio’s entry into the Telecom sector in 2016 backed by free services, the biggies of the market have been stumbling and suffering from one crisis to the next. In the last 18 months alone, the data rates have fallen by a mammoth 90% while the cost of calls has gone down a mighty 58% as well.

Top executives of this UK-based Telecommunications company mentioned that the Telecom industry is going through severe financial crisis while the operators still have to purchase multiple licenses. Ironically, even though user consumption rose a gargantuan 800%, over time the revenue stream trickled by 20%, explained Sood using Vodafone as an example.

He added that, “We have market-driven spectrum but yet telcos pay administrative costs such as SUC, and that needs to be changes.” According to Sood, the government and the Telecom Companies alike are losing big time. As per last year statistics, the AGR of Rs.2 lakh crore fell 20% and now aggregates at only about Rs.1.6 lakh crore.

The Solution

His solution is simple. To survive, the telcos have to be allowed to buy back their own spectrum. Because, in a given circle, an undermining of 15 or 20 million customers would make an investment stretching across 20 years vanish in a blink of an eye.

Jio’s disruptive entrance into the Telecom market offering free and heavily-discounted services sent the existing service providers into a frenzy. To maintain their hold onto the market and counter Jio’s move, they had to lower their tariffs and suffer through heavy losses.

The ARPU for the Telecom Industry’s top trio of AirtelVodafone, and Idea kept on falling. Reason being that to retain and even acquiring new customers, the Companies had to launch plans offering competitive rates irrespective of the high cost incurred per customer.

But it is Reliance Jio who has suffered the maximum setback. In Q4 FY18, its quarter-to-quarter per month ARPU saw a monumental decline of 11%. According to Sood, India has the lowest ARPU in the world.

As an elected Chairman of COAI (Cellular Operators Association of India), Sunil Sood said that in the coming few years Telecom Companies will in Congress invest about $100 billion but after spending an equivalent amount already.

Vodafone-Idea Merger:

Vodafone and Idea joined hands last March to move forward together with a projected cost saving of Rs.8,400 crore annually by its fourth operative year. As a merged operator, Vodafone Idea will have a subscriber base of 430 million, revenue market share of 37%, projected revenue of Rs.60,000 crore, and a debt of Rs.1,25,000 crore.

Their combined loss, before the partnership, amounted to 20% of total revenue and a 400 base point decline in revenue share. Therefore, their first order of business is to adopt cost-saving measures so that they can return to profitability. Hiring freeze, cut in advertising and marketing spending, merging offices, and sharing office space are some of the areas that the company is trying to save cost.

Even with sharp cost-cutting techniques, it is being speculated that their operating profit won’t exceed Rs.16,000 crore annually for the upcoming three years.

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