Before anything, let’s talk about the telecommunication industry and its history in India. Indian telecommunication industry is considered as one of the most important industries for the economic growth of the country. Telecommunication industry’s history dates back to 1851 when the first landline was made functional by the government of India near Kolkata. After the Telephone services were introduced in 1881, it merged with the postal system in 1883. In 1923, Indian radio Telegraph company was formed while later In 1932,The Eastern Telegraph Co. (ETC), which was formed in 1872, and the Indian Radio Telegraph Co. (IRT), which was formed in 1927, merged to form the Indian Radio and Cable Communications Co. (IRCC). 1947 saw an emergence of a monopoly by the government’s ministry of communications to form the posts, Telephone and telegraph (PTT). Post 1984, the Telecommunication industry experienced privatization at a large scale. DoT (Department of Telecom) was created to formulate policies for the Telecommunication services in India. In the year 1986, DoT was converted into two different companies, namely, Videsh Sanchar Nigam Limited (VSNL) and Mahanagar Telephone Nigam Limited (MTNL) and these two were completely owned by the government of India. In 1997, The Telecom Regulatory Authority of India (TRAI) was set up by the government of India. TRAI is responsible for regulating the telecom sector in India. The chairman of this body is Mr. Ram Sewak Sharma and the its headquarters are situated in New Delhi, India
If we just have to give a gist of the Telecom sector, it would go something like this: the Indian Telecom industry is divided into two sectors:
- Public sector
- Private sector
- Public sector comprises of MTNL and BSNL, whereas private sector comprises of Indian companies and Foreign Invested companies.
- The challenges that the telecom industry faces:
- Substantial Investments in 4G Infrastructure
- Lack of Telecom Infrastructure in Semi-rural and Rural areas
- Pressure on Margins Due to Competition
- Rapidly Falling ARPU (Average Revenue Per User)
What is ARPU?
ARPU stands for Average Revenue Per User. It is measured by dividing the total revenue to the numer of subscribers. The telecom industry is seen to be flourishing with the increase in sharing of data, more and more broadand subscribers and increase in data tariffs. This has led to an immense growth in the ARPU in the telecom industry.
Now, even though the telecom industry is seeing a tremendous growth in the ARPU, the company Vi is still in debt and loss. The company’s ARPU rose to rupees 121 from rupees 119 in september quarter end. The net loss for the Q3 for Vi has been narrowed down to rupees 4,532 crore.
Vodafone-Idea is a telecommunication company operating in India with its headquarters in Mumbai, Maharashtra and Gandhi Nagar, Gujarati, India. Vodafone Idea is a pan-India (Present Across Nation) integrated GSM (Global System for Mobile Communications) operator offering 2G, 3G and 4G, 4G+ and VoLTE.Vodafone India merged with Idea Cellular to form an entity named Vodafone Idea Limited on 31st of August, 2018.The chairman of this entity is Kumar Mangalam Birla.Ravinder Takkar is the current CEO of the company.Vodafone holds a 48.1% stake currently in the entire entity while Aditya Birla Group holds a 26% stake.On 7th of September,2020, Vodafone idea revealed its new identity ‘Vi’ involving the merging of two telecommunication companies ‘Vodafone and Idea’
Vi initially began as Birla Communications Limited in 1995 at Mumbai, Maharashtra. Their name was changed to Birla AT&T Communications in 1996 following the execution of a joint venture between AT&T Corporation and Grasim Industries Limited in 1995 of which the Aditya Birla group held 51% of the equity share capital and AWS group held about 49% of the equity share capital. Vi is currently under an enormous debt and is liable to pay an amount of rupees 11,710 crore. However, the improved 4G service has helped in retaining existing customers. Its total subscriber base is about 26.98 crore. Vi is currently looking to utilize cash from fundraising to boost up its 4G coverage.J M Financial said “Vi is confident of having enough capacity to meet increased usage with its current capex levels, but a fund raise is necessary to ensure adequate capex in the medium term,”. Vi is expected to raise tariffs on the back of ARPU. A tarrif hike is very important for a debt-ridden company like Vodafone Idea.
Other companies’ in the third quarter:
Gained a profit of rupees 763 crore by merging its tower arm with Indus towers Ltd.
Upgraded to 4G plan for existing customers having 2G and 4G plans which helped in revenue generation.
Mobile business grew by 6.8% quarter-on-quarter without any price hikes.
ARPU rose to rupees 151 in the third quarter.
Saw more 2.51 crore customers on a gross level and 52 lakh subscribers in the third quarter.