Vodafone Idea Ltd (IDEA) Q4 FY21 Earnings Concall Transcript

Vodafone Idea Ltd (NSE:IDEA) Q4 FY21 earnings concall dated Jul. 02, 2021.

Corporate Participants:

Ravinder Takkar — Managing Director and Chief Executive Officer

Akshaya Moondra — Chief Financial Officer

Analysts:

Manish Ostwal — Nirmal Bang Securities — Analyst

Vivekanand S — Ambit Capital — Analyst

Vishnu K.G. — JM Financial — Analyst

Pradyumna Dalmia — Lansdowne Investments — Analyst

Sachin Salgaonkar — Bank of America — Analyst

Chen Samuel — AllianceBernstein — Analyst

Pranav Kshatriya — Edelweiss — Analyst

Presentation:

Operator

Good afternoon, ladies and gentlemen. This is Margaret, the moderator for your conference call. Welcome to the Vodafone Idea Limited Conference. [Operator Instructions] After the presentation, a question-and-answer session will be conducted.

We have with us today, Mr. Ravinder Takkar, MD and CEO of Vodafone Idea Limited; and Mr. Akshaya Moondra, CFO of Vodafone Idea Limited, along with other key members of the Senior Management on this call. I want to thank the Management team on behalf of all the participants for taking valuable time to be with us. Given that the Senior Management is on this conference call, participants are requested to focus on the key strategic and important questions, to make sure that we make good use of the Senior Management’s time.

I must remind you that the discussions on today’s call may contain forward-looking statements and must be viewed therefore in conjunction with the risks that the company faces. [Operator Instructions]

With this, I hand the conference call now over to Mr. Ravinder Takkar. Thank you and over to you, sir.

Ravinder Takkar — Managing Director and Chief Executive Officer

Thank you, Margaret. On behalf of Vodafone Idea, I welcome all participants to this earnings call. On 30th June, our Board of Directors adopted the audited results for the quarter, as well as for full financial year ending March 31st 2021. The detailed press release, quarterly report, unaudited financials have been uploaded on our website. I hope you had a chance to go through the same. As usual, I will start with discussing our ongoing strategic initiatives, along with operational highlights for the quarter. I will then hand over to Akshaya to share details of the company’s financial performance.

Before that, let me talk about the impact of the severe second wave of COVID that the country has grappled with over the last few months. It has been a difficult period for the Vodafone Idea family. Since the beginning of the pandemic, we have lost few of our colleagues and several others have been affected, and many of our colleagues have lost their near and dear ones. In these terrible times, as an organization, we’ve stayed true to our culture of care and have provided full medical support to every employee, who had to be hospitalized or needed any medical assistance. We’ve extended financial support to offset cash flow difficulty for employees, who had unfortunate situations in their families.

Our Insurance policies are providing industry-leading financial provisions in case of loss of life. There are COVID ward rooms in every cluster headquarter’s that track, coordinate support and connect with every employee, be it to ensure connecting the Doctors, scouting for oxygen cylinders, facilitating hospitalization or arranging for medication. Our external constant partners offer support and strength to employees, who have recovered from COVID or are in need of help to deal with the grief and their circumstances.

Throughout this pandemic, our mobility service has formed the backbone of the digital infrastructure of the country. Our focus continues to be on delivering uninterrupted services and great end-user experience, while ensuring safety of our employees and partners.

I would like to thank all our employees, especially our network teams, who’ve been working non-stop through the pandemic providing critical support to our customers and communities. Our frontline teams have been working relentlessly in very difficult circumstances, which were further aggravated during the cyclones on both the West and the East Coast of the country. Our network engineers were indeed the true heroes braving all odds to ensure network was up and running 24/7.

There are scores of stories of our network warriors, such as our team installing the tower overnight in a small village in Kerala enabling 150 students to access online education or working on war footing for setting up equipment for enhanced connectivity in one of the biggest hospitals in Mumbai. Many of our teams traveled 100s of kilometers to restore critical, delivered SIM cards at doorsteps or just set up services on a smartphone for a senior citizen at home. While this was the need of the hour, we also maintained that we do not do business while putting our people at risk.

Therefore, each and every employee and associates, who had to step out of their house was fully trained on our comprehensive COVID protocol and was provided adequate safety gear. We have also been arranging vaccination camps for our employees and their families. As a socially responsible corporate, we remain committed to helping the country to deal with the crisis in every possible way.

During this phase of the pandemic, we have again extended support to our marginalized customers as we did during the first wave. We have provided benefits worth up to INR2.9 billion to over 60 million low-income customers. We had also advertising CSR support to alleviate or mitigate the impact of COVID. We plan to reach out to farmers, students, self health groups, living families and dependents, where the sole breadwinner has lost their life due to COVID-19. We also proposed to facilitate vaccination drive in several places.

Now, moving on to our key strategic initiatives. The first one being focused network investments. We continue to follow our focused approach to investments. Hires towards our 16 priority circles, which contribute over 94% of our revenue. This helps us in utilizing our capex effectively, while ensuring that we continue to offer superior customer experience in these areas. We are progressively upgrading our 3G network to 4G, we closed over 30,000 3G sites during the year, while we added 43,500 4G FDD sites mainly through re-farming of 2G or 3G spectrum.

The process of re-farming 3G spectrum to 4G on majority of sites in different cities has substantially enhanced the GIGAnet 4G capacity in those cities. Our overall broadband site count stood at around 453,000, compared to 436,000 a year ago. Our 4G coverage has crossed the benchmark of 1 billion Indians during the year. Our constant endeavor to the best 4G network in the country is testified through top rankings across various third-party reports, on both data and voice.

Vi GIGAnet remains the fastest 4G network in the country for three consecutive quarters in FY ’21 as per Ookla. Based on TRAI’s MyCall app data, we also had the best voice quality in the country for six months consecutively, from November 2020 to April ’21. This comes at a time when people and businesses are more reliant on telecom connectivity for their work, education and all other aspects of life. Our focus on providing superior customer experience is helping us drive stronger network perception.

While we are currently in the middle of our 4G capex cycle, we have been deploying the foot print, which is 5G-ready on both radio and core. We have the advantage of having the latest 4G equipment and technologies, which are capable of upgrade to 5G. Also, we’ve made substantial progress in deploying several 5G-ready technologies such as Massive MIMO, DSR, cloudification of core, etc, and they are very much central to our strategy for future growth.

Recently, we have tested dynamic circuit sharing as a feature between 4G and 5G with our existing 4G spectrum. We have also initiated 5G trials in our — with our major network partners, Nokia and Ericsson on the freshly allocated 5G spectrum in two cities, Pune and Gandhinagar.

Moving on to market initiatives. In the post-COVID world, the goal of internet has become more relevant and digital adoption and usage has significantly accelerated. With the need for data increasing, we launched and promoted Unlimited Night Data, a differentiated proposition wherein customers can enjoy unlimited data between midnight to 6:00 AM on unlimited packs above INR249. We also launched Weekend Data Rollover, an exclusive proposition for Vi customers to carry forward unused data from weekdays to weekends on unlimited packs above INR249.

We will continue to look at ways to improve ARPU by driving 4G dual plan penetration. We also aim to scale up proportion of high ARPU subscribers, through large programs in conjunction with OEM’s and NBFC’s for 4G devices. That said, tariff hikes remains a critical source to revive the sector and ensure that operations make a reasonable return on their massive network and spectrum investments.

Recently, all three operators have launched new plans without daily limits with lesser data bundles, compared to the regular daily data plans. We believe these plans are a step in the right direction as pricing structure needs to correct and we have the ability to sell data bundles, which consumers can use any time and then pay more if they need additional data allowance.

Now on business services. Business services remain one of our key focus areas. As we continue to innovate and offer solutions in line with the changing requirements of the customers, our traditional fixed line data and voice offerings continue to see growth during this challenging period. Recently, we introduced managed sub services for businesses for whom voice call are a key business resource. We are the first and only telecom operator to provide managed sub services in India.

The new and emerging cloud and IoT Services are central to our business services growth strategy. We continue to derive tremendous synergies from our relationship with Vodafone Group, who are a global leader in the IoT segment. We have further strengthened our IoT portfolio with the launch of Integrated IoT Solutions for enterprises. We are the only telecom company in India to offer a secure end-to-end IoT solution that comprises of connectivity, hardware, network, applications, analytics, security and support. The launch of our Integrated IoT Solution is a strategic step towards making the business an IoT ecosystem integrator for Indian enterprises and positioning us to have a ecosystem play driving our transformation from a telco to a techco.

The pandemic has accelerated growth in digital ways of working for businesses and workloads are increasingly migrating to the cloud, leading to a rise in demand for reliable security solutions. We have strengthened our security portfolio with the launch of Vi Cloud Firewall, a cloud deployed security solution for enterprises and businesses. In order to power hybrid workplaces and provide seamless digital experiences, we have launched Vi Business Plus, an industry-leading mobility solution, which enables today’s businesses to strike a fine balance between business objectives and employee mobility needs.

Our enterprise digital platform for business, the Mobility has been recognized by global jury at IMCG Global Awards 2020, for having the best customer centricity and architectural design. The next strategic initiative is driving partnerships and digital revenue streams. We continue to partner with content providers to promote new and engaging content through Vi Movies and TV. Our vast content library coupled with differentiated data benefits in the industry has led to a winning proposition. We have collaborated with Hungama to launch pay-per-view model for premiering digital films from Hollywood at one-time cost.

We have also — we added Disney plus Hotstar to our extensive list of content partners, further fortifying our highly competitive content portfolio. This collaboration aims to bring the best of video content to Indians across the two most popular genres of entertainment and cricket. This will give our customers access to IPL matches and other cricketing content throughout the year. We have also been entering into strategic partnerships with key players in the area of learning and upskilling, health and wellness and business help, to offer benefits to new age customers.

The Company has forged partnerships with several Internet-first companies and plans to onboard more partners under each of these areas to enable new users to get exclusive offers from these players. Healthcare being a priority, we have even provided free health insurance to our customers through Aditya Birla Health Insurance. Our innovative and partnership with content strategy has thus helped us adapt a telco-first approach for content monetization in this hugely untapped market. We will thus continue to focus our platform capabilities to offer deeper integration with our partners for a differentiated experience, create monetization opportunities and truly become an integrated digital service provider.

And lastly, we have made good progress on our cost optimization exercise. As you are aware, we targeted to achieve INR40 billion of annualized opex savings by the end of this calendar year. As of this quarter, we have already achieved approximately 65% of the targeted annual cost savings.

Moving onto operational highlights for the quarter. Revenue for the quarter was INR96.1 billion, a decline of 11.8% quarter-on-quarter on account of IUC regime going away since January 1st 2021, as well as due to fewer number of days in the quarter. The subscriber base was 267.8 million in Q4 FY ’21, a decline of 2 million similar to what we witnessed in Q3.

However, we continue to see healthy traction in 4G UI Net Additions, which remain a key focus area for us. At the end of the quarter, the 4G subscriber base stood at 113.9 million, an addition of 4.2 million 4G customers, highest ever in the last five quarters. Subscriber churn however increased to 3%, compared to 2.3% a quarter ago, due to increased market activity.

Now a quick update on other developments. In the spectrum auction conducted in March 2021, we acquired 23.6 megahertz of spectrum across 900 and 1,800 megahertz band, in five circles for a total consideration of INR19.93 billion. We have also optimized spectrum holding in some circles. With that, our spectrum footprint of 1,768 megahertz is very competitive, and more than adequate to serve existing customers, as well as add several million more.

On the AGR matter, as you are aware, we have filed the modification application in the Supreme Court requesting them to allow the DoT to correct the manifest clerical arithmetic errors in competition of the AGR demand, which is currently pending hearing. Further, we have informed DoT that we have paid more than 10% of the total dues and complied with the Honorable Supreme Court order. We have also filed an affidavit to the Supreme Court confirming payment of 10% of the total dues, with an undertaking to pay the arrears as per the Court judgment. On fund-raising, we are currently in active discussions with potential investors.With that, I hand over to Akshaya, who will share the financial highlights for the quarter.

Akshaya Moondra — Chief Financial Officer

Thanks, Ravinder. A very good afternoon to participants from India and a good morning or evening as applicable to overseas participants.

Moving on to the financial highlights, revenue for the quarter stood at INR96.1 billion as against INR108.9 billion in Q3 FY ’21. After quarter-on-quarter decline of 11.8%, 9.6% was on account of domestic IOC or mobile termination, abolishment effective January 1, 2021 and 2.2% was on account of lower number of days in the quarter. The average daily revenue adjusted for IUC, was therefore flat quarter-on-quarter.

Adjusted for IndAS 116 impact, EBITDA was INR21.7 billion for the quarter. There were one-off [Indecipherable] of INR4.5 billion in the quarter primarily in network and IT costs. We continue to progress well on our cost optimization exercise to drive further savings and target to reduce our annual operating costs by INR40 billion over Q4 FY ’20 baseline by the end of this calendar year. On a run rate basis, by the end of Q4 FY ’21, we have achieved approximately 65% of our target cost savings.

Q4 FY ’21 capex stands at INR15.4 billion, taking the full financial year capex to INR41.5 billion. For the full financial year FY ’21, revenue and EBITDA were INR419.5 billion and INR169.5 billion respectively. Excluding IUC revenue, FY ’21 revenue declined by 3.3%, compared to FY ’20.

FY ’21 EBITDA excluding IndAS 116 impact, was INR80.4 billion, a significant year-on-year improvement, compared to INR58.1 billion in FY ’20. The improvement of INR22.3 billion was despite the revenue decline and loss of margin on account of abolishment of domestic IUC, primarily due to several cost optimization initiatives undertaken by the company during the year.

FY ’21 EBITDA was also positively impacted by INR8 billion, compared to last year, due to the amortization of subscriber acquisition cost over the average expected customer life starting Q3 FY ’21, based on updated estimates of customer lifecycle. Also, this is in line with the general industry practice.

On AGR, as Ravinder mentioned in his remarks, we have filed the modification application in the Supreme Court requesting them to allow DoT to make corrections for manifest errors and DoT demands. As the matter is pending hearing, the AGR liability in our books is accounted for, without considering any impact of corrections that may arise from the filed application.

Resultantly, gross debt excluding lease liabilities as of March 31, 2021 was INR1,803.1 billion comprising of deferred spectrum payment obligations of INR962.7 billion; AGR liability of INR609.6 billion, that are due to the government and debt from banks and financial institutions of INR230.8 billion. Cash and cash equivalents were INR3.5 billion and net debt stood at INR1,799.6 billion.

With this, I hand over the call back to Margaret and open the floor for questions.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer. [Operator Instructions] The first question is from the line of Manish Ostwal from Nirmal Bang. Please go ahead.

Manish Ostwal — Nirmal Bang Securities — Analyst

Yes, Sir. Thank you for the opportunity. My question on the capital raise plans. So, in your opinion, the lack of clarity on account of AGR modification is the key hurdle for not able to raise the funds. So, what is your — why we’re — so much of delay in the capital raise?

Ravinder Takkar — Managing Director and Chief Executive Officer

Okay, Manish. Let me try to answer that question. The modification application is with the Supreme Court, we filed it, these are arithmetic errors and omissions. We are very confident that it is not the intent of the government DoT to make us pay for these, with these type of errors. So we are quite confident that the Supreme Court will allow the DoT to make adjustments based on those errors and omissions that were done in the first round of calculations of these AGR deals.

I would say that while this is an important element of confirmation that we are looking for from Supreme Court, I do not believe that this is a very big hurdle today in the minds of investors, who are engaging with us on fundraising, as the key issue for fundraising within the company.

Manish Ostwal — Nirmal Bang Securities — Analyst

Sir, any timeline for the capital raise you would like to highlight?

Ravinder Takkar — Managing Director and Chief Executive Officer

No, Manish, I would not like to speculate. All I can tell you is that we are in discussion. I can also confirm the view that there is a continued interest in when investing in the telecom sector in the country. I think the biggest hurdle that you asked me, if you ask me, something that they always ask us, and we have also mentioned several times, is that the overall industry is under stress, because of the pricing situation in the industry. As soon as the pricing improves, I think this creates a significant amount of confidence, not only in the industry players, but overall starts to show positive returns for the industry. And I think that is really what can drive a significant amount of investment, not only from new investors, but also from existing investors into the business. But I would not like to speculate on the timeframes.

Manish Ostwal — Nirmal Bang Securities — Analyst

Thank you, sir. Thank you.

Operator

Thank you. The next question is from the line of Vivekanand S from Ambit Capital. Please go ahead.

Vivekanand S — Ambit Capital — Analyst

Hi, thank you very much for the opportunity. I have three questions, so one is — thank you so much for the discussion on the market initiatives to drive ARPU. So elaborating further on the new tariff plans that were launched, what — Ravinder, in your view, what is the roadmap to the market repair that we’ve been talking about, our competitors have also been talking about it for a while, and the role of the regulator there? That’s question one.

The second one is on the liquidity position. Right now, our cash balance is around INR3.5 billion. But if you could highlight any potential tax refund or contingent assets and the timing that you expect these assets to practify, that would be great.

And lastly, in terms of your conversation with the government and the lender, in respect to the spectrum instalment payment commencing from 9th April and of course the next 12 months. The banks that they expect payments from you, is there any progress on the dialogs there with respect to giving you more time till the market repair happens?

Ravinder Takkar — Managing Director and Chief Executive Officer

Okay. Thank you, Vivek. Let me start by answering some of the questions and then I will hand over to Akshaya for some of the ones which are — he is in a better position to answer. Let me start with the first question that you had regarding the new tariff plans. I think you know, as has been mentioned many times by myself, as well as several of the industry players, that the biggest issue that is of the problem in this sector today is the pricing, the pricing is much lower than it needs to be. Whereas the consumption that our customers and overall the citizens enjoy is significantly higher than what it used to be from some several years ago.

Now I think, how we move towards repairing that, we believe that there is — there are several ways in which that can happen. One is, in regards to floor pricing. This is, as you know that all industry players jointly through COAI, have written to the regulator to look at floor pricing as an option. And regulator had started consultation in terms of floor pricing in which all representation was done, that there is a floor price that is needed within the country and within the industry.

Now, while we are still waiting for regulator to complete that consultation and come back with an answer, which can hopefully help strengthen the returns in this industry and overall relieve the stress in this industry, I think we believe that floor pricing remains the best and most preferred way to fix this issue, because it has been a challenge to do that for several years now.

Also at the meantime, I think there are other ways in which improvements can be made. For example, somehow in our industry, the price plans that are mostly prevalent today are per day type of use allowance that they provide, which means you either get 1 gigabyte or 1.5 or 2 or 3 depending on what bucket you want to get of gigabytes a day. Now, this is a very strange model, one because customer usage doesn’t always work in that manner. People use a certain amount of data, someday they use more, some day they use less, but this recurring daily model, it does not make any sense.

Secondly, if you look at the total amount of data, that means you are given in a month is significantly higher than the actual usage, in it for all three operators from a reported number of perspective, the usage of data per subscriber is in the low 20 gigabytes a month in that period. Whereas even the basic plan, which is 1GB a day obviously gives 28 GBs in that period. So it’s a very strange thing that, how do you actually move people up and customers up to a higher payment ladder. And we believe that the new plans that have been introduced and just recently, which offer a bucket of data, which you can use during a period of time 30 days, 60 days, 90 days, and you can use that anytime, daytime, nigh time, weekends, weekdays, you can use it any time during the day and when you run out of that, you can buy more data, which I believe is the right architecture for price increase.

So, to summarize my answer, one which is absolutely a tariff hike is needed. Floor pricing is the best way to implement that, but even when you do floor pricing, it needs to be done at the right price, although the architecture of the plans that have now been introduced seem to be headed in the right direction and I think this is something that can drive positive momentum in the industry on the — as far as the pricing is concerned.

Let me answer your second — actually the third question regarding situation with the discussion with the government, before I hand it over to Akshaya for his comments on liquidity and discussions with the banks. So on the government part, I think we — as you know we are in our two years spectrum moratorium situation as a industry right now. The two year moratorium was granted by the government, basically, because there was stress in the industry and there were challenges, which were not allowing people to make those spectrum payments or operators to make the spectrum payment. So while that moratorium was a big relief and some of the items that were causing stress in the industry like AGR, have to some extent been addressed, although a little bit more work to be done, but broadly Supreme Court has ruled on it, which is good.

But the other significant issues like pricing that I mentioned earlier, still continue to remain. So unless those big elements are not addressed, I think in some ways the stress will continue. And in that situation, I think it is only reasonable to say that the government, that they have to provide an extension to the moratorium until these pricing related issues and the stress in the industry and the sector is removed. And that’s the request that we have made to the government.

And I think it’s reasonable under the current scenario that we are seeing. We are not the only ones who are saying there is stress in the industry, I think it’s been vocally said by other players as well. And I think it’s important there that the government addresses it. And I think spectrum moratorium can be further increased until that stress is really relieved.

Akshaya, I hand over to you for the liquidity question that was asked by Vivek.

Akshaya Moondra — Chief Financial Officer

Yes. Thanks, Ravinder and hi, Vivek. So Vivek, your question is that, what are the assets which are available, which we could, kind of, convert to cash? So let’s say, one is, I think as we’ve said from the beginning that at the time of merger we had got tax refunds of about the INR83 billion. Out of that, till date we have received about INR15 billion and there is another INR68 billion to be received. We also have some GST export-related refunds where the refunds have just started coming in, it was just the first round of refund, so to set that process has took some time.

And then we also have some surplus land, which was initially taken for data centers, which we are in the process of divesting. I think all in, these items combined together, we would say that we could possibly realize cash out of this in this financial year to the tune of about INR30 billion.

Vivekanand S — Ambit Capital — Analyst

All right. Just one small follow-up Akshaya. Thank you for the clarification. The Vodafone PLC contingent assets, which was linked to the AGR payment, how much of that is pending?

Akshaya Moondra — Chief Financial Officer

So the total cash payment, which Vodafone Group, where was the capex, we have explained earlier is INR84 billion. And this financial year, they had paid about INR20 billion. So there is another INR64 billion, which are to come. These are linked to payment and some of this also gets offset by the tax refund, if they are received on behalf of Vodafone. So — and the next settlement will be due in June ’22. So, it will ultimately depend on what is the payment that we have made for the AGR, is there any tax refund, but there will be a next settlement in June ’22.

Vivekanand S — Ambit Capital — Analyst

All right. And my last one was on the dialog with banks for the loans that are payable over the next 12-months. Even the current portion of the long-term loan?

Akshaya Moondra — Chief Financial Officer

So, I think we are looking at first, kind of, the funding, which is — as we have said in the past, is more like debt or hybrid structured funding, which we are working on. I think we will engage with our lenders at a suitable time to see how they can support us, then providing any new facilities. I think we’ve just — we are in constant engagement with them to explain them about what are our funding plans and all. In terms of whether they could support us with any further funding, that is a discussion, which I think is somewhat linked to the new funding that we are raising. And I think that discussion will happen at a suitable time.

Vivekanand S — Ambit Capital — Analyst

Right, right. All right. Thank you gentlemen for the detailed responses. All the best.

Akshaya Moondra — Chief Financial Officer

Thanks.

Ravinder Takkar — Managing Director and Chief Executive Officer

Thanks, Vivek.

Operator

Thank you. The next question is from the line of Vishnu K.G. from JM Financial. Please go ahead.

Vishnu K.G. — JM Financial — Analyst

Hi, Sir. Thank you for the opportunity. Just wanted to pick your [Indecipherable] on ARPU. So, essentially we had the last round of tariff hikes in December ’19 and before an ARPU increase in 4Q FY ’20. So if have a look at your numbers, even if we adjust for the IUC revenue loss, the 4Q FY ’21 ARPUs are actually slightly lower than the 4Q FY ’20 ARPUs, in spite of higher 4G users. So, could you please explain why the mismatch is there? Is it because of some, kind of, revenue leakage in the bottom of the premium subscribers?

Ravinder Takkar — Managing Director and Chief Executive Officer

Akshaya, would you please take that?

Akshaya Moondra — Chief Financial Officer

So, actually — no, there is no reduction or leakage. If you look at it, the ARPU appears to be flat, but ours is a business which is dependent on daily revenue. So actually there is a reduction of two days on quarter-to-quarter. So effectively, if we look at on a daily basis our ARPU has grown by 2%, which is a decent growth of ARPU quarter-on-quarter.

Vishnu K.G. — JM Financial — Analyst

And sir, as — lookin on an Y-o-Y basis, 4Q FY ’20 versus 4Q FY ’21?

Akshaya Moondra — Chief Financial Officer

Sorry, FY ’20 versus?

Vishnu K.G. — JM Financial — Analyst

4Q FY ’21.

Akshaya Moondra — Chief Financial Officer

Just give me a minute. I didn’t quite, sorry could you repeat your question?

Vishnu K.G. — JM Financial — Analyst

Yes, sure. Sir, on a Y-o-Y basis, if I look at the ARPU, despite the higher number of 4G users, the ARPU seems to be slightly lower or flattish. So why is there a disconnect [Speech Overlap]

Akshaya Moondra — Chief Financial Officer

Year-on-year that will have to be normalize for interconnect charges, which has gone away. So last year we used to have interconnect charges and Q4, if that is what we are looking at, there is no interconnect. And that could be the reason for the gap. So I do not exactly know what figures are you comparing, but if you are comparing any figure in FY ’20 with Q4 that would have an impact of IUC. So can I suggest, because if you are looking at a specific figure, maybe you can connect with Arpit offline and he can explain you. But as I said, Q3 to Q4, our effective ARPU on a daily basis has improved by about 2%. Year-on-year, if you’re making a comparison that will have to be seen for interconnect charges normalization.

Vishnu K.G. — JM Financial — Analyst

Sure, sir. I’ll connect offline. Thank you.

Operator

Thank you. The next question is from the line of Pradyumna Dalmia from Lansdowne Investments. Please go ahead.

Pradyumna Dalmia — Lansdowne Investments — Analyst

Hi there, good afternoon, gentlemen. You know, I must say I’m slightly disappointed today and sad as a shareholder, because of our inability to raise capital over the last nine months or so, especially at a time when our competitors have been successful in raising billions of dollars during this time, right? And yes, the sector is under pressure, ARPUs are low, AGR dues are there, but that has impacted all the players, right? Maybe as severely little more severely than some of the others, but I’m still unable to understand, and this is a question I had asked in the last call as well that why have we not been successful in raising capital and attracting investment at such time?

And also the kind of commentary that I’ve been seeing and hearing from the management over the last week or so, it’s little concerning when the test to the DoT that look, you know, there are concerns about the company I think on as a going concern. And obviously the innovative, I mean, it is almost inevitable that the company will not be able to pay the AGR dues in — sorry the spectrum dues that are due in April ’22. So what happens if there is no relief from the government or the SC on the AGR dues? Could you just clarify those points please?

Akshaya Moondra — Chief Financial Officer

So I think it’s — I certainly don’t want to say much beyond on funding and the timing than what has already been said. All I can tell you is that we are fully engaged with investors. There continues to be interest and we will announce something as soon as the company is in a position to announce. So I think that unfortunately is the best I can tell you in that regard.

Pradyumna Dalmia — Lansdowne Investments — Analyst

Is there any timeline that you’ve set or a deadline or, you know…

Akshaya Moondra — Chief Financial Officer

As I said, no deadline has been set. And I cannot talk about the timelines. When the company is in the position to inform and make an announcement, we will make an announcement, but I cannot speculate on timelines for you. In regards to the other question that you had mentioned, introduction to DoT. I think the — I explained earlier — in the earlier question that was asked which was the reason why there was a spectrum moratorium that was given two years ago was, because of the stress in the industry. It is well recognized.

And while other players you are mentioning are under the same stress and they have been based up and they’re also enjoying the benefit of the moratorium, because they continue to be under stress as well. So I think from that perspective, we are in the same situation. And unless the underlying conditions of tariff increases and floor pricing, which are absolutely important in the industry and again these are not something that we say, they are said by all the players in the market. Representation is done by everybody through the COI saying that there is stress in the industry and not sufficient returns are being made in this industry.

These are issues that impact everybody and they have been mentioned repeatedly. I think it’s only fair to say that unless those issues get addressed to some extent magically to say that the moratorium should be lifted is very unreasonable. And I think our communication with the DoT is it’s that regard to notify them that unless those issues are addressed, the stress in the industry continues for which potentially a moratorium would need to be extended for them. I think, that’s pretty much the only thing that we can say, I would not like to back there about, the contents of the letter that we had to DoT in a confidential manner.

Pradyumna Dalmia — Lansdowne Investments — Analyst

Sure. But I mean, in the event that the DoT does not grant this extension of the moratorium. And we do not get any relief from the SC on the calculation of the AGR. What is the eventuality or what are the options that we are looking at?

Akshaya Moondra — Chief Financial Officer

I think it’s very difficult and certainly not the right place for me to speculate on any of those options. I think we have made it very clear what we have asked of the government. And I’ve made it also clear what we have said in our modification applications, which is in front of Supreme Court. And hopefully the hearing on that will be taking place soon. It is completely inappropriate for me to speculate on what those other entity is going to do in regards to those important decisions.

Pradyumna Dalmia — Lansdowne Investments — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Sachin Salgaonkar from Bank of America. Please go ahead. Sachin Salgaonkar from Bank of America. Your line is in the top mode. You may go ahead with your question.

Sachin Salgaonkar — Bank of America — Analyst

Hi, thank you for the opportunity. I have two questions. First question is what is plan B, if you guys are not able to raise funding? And I’m not asking you guys to speculate, but just wanted to understand out here?

Ravinder Takkar — Managing Director and Chief Executive Officer

Sachin, if that was the only question that you had, I think the — we remain confident that there is an opportunity to raise funding for the company. I don’t think at this point a plan B for funding is needed. We have a plan, we are engaged with investors. We expect this to take place. And as soon as it’s there, we will report it. But I don’t think there is any reason to start creating plan B, because funding is not happening. We are not at that point yet. I don’t think we will reach to that point. We are confident that funding will take place in the coming weeks.

Sachin Salgaonkar — Bank of America — Analyst

Okay. Sir, the reason I’m asking it is, there was a media article today which talks about Vodafone Idea actually mentioning a letter to DoT that investors are unwilling to invest into the telco until the industry health improves. And hence, I am asking that?

Ravinder Takkar — Managing Director and Chief Executive Officer

No, Sachin, as you know that media speculates a lot. There’s a lot of speculation. If I have to start answering every media speculation that takes place, I think it will be really difficult to do that. So I would prefer not to respond to media speculations, stories are written every day, and I’m not really sure if we should be responding to every speculation that takes place in the media.

Sachin Salgaonkar — Bank of America — Analyst

Okay, thank you for that. My second question is, I wanted to actually understand that you guys have been noted as the best network on voice and data and despite that we’re losing — seeing Vodafone Idea losing customers every quarter, so what could be done more by you guys so that the net add subscribers goes back into the positive territory?

Ravinder Takkar — Managing Director and Chief Executive Officer

Yes, very good question, Sachin. I think, so first of all, it is absolutely true. We’ve been rated the best network. The quality of the network that we provide to our customers and they enjoy is absolutely fabulous. And I think in many ways we’re very proud of what we have been able to achieve through a fairly difficult and complicated integration of the two companies and then further refinement and fine-tuning and adding of capacity, as well as coverage in our networks.

Now, I think, what I would say is that, we — once we did the integration and consolidation and we optimized the network, as you know, we have also launched our brand Vi, which is only six months old, actually a little bit more than six months old. And, within that, part of I think is for people to recognize, customers to recognize, non-users, to recognize the quality of our network, both in the pull of our brand, which is starting to happen and we are building operational momentum on that. Also, you will notice that for the last two quarters, our customer base has now stabilized, whereas only around we were losing significant number of customers.

And then, more importantly, the important area of 4G customers, we have now grown consecutively for the last two quarters since the launch of our brand, we’re in a positive momentum. And we believe that, that is the right way to build on the forward momentum on subscribers and gain the right type of subscribers in the marketplace rather than just saying that, I will add subscribers, which are bottom of the pyramid or low value subscribers.

And our 4G additions, as I mentioned in my opening speech, has been the highest in the last five quarters. Again, we are building momentum there and the right type customers are coming to the network. They are enjoying the quality of the network and we hope that that momentum will continue going forward. Although obviously for COVID reasons, there are challenges there as well. But, otherwise, I think we are going in the right direction. And I think this is really an important factor for the company and our focus is very much on operational improvements on driving the saliency of our brand and a positive pull for data customers going forward.

As you can also see, data volume growth is 8.5% quarter-on-quarter. That means, again, our customers are enjoying quality data, they are coming to us for the quality of our network and we hope that momentum continues. And, overall, we have shown that our scale customer base is now stable.

Sachin Salgaonkar — Bank of America — Analyst

Thank you. And one last question is about the Jio Google smart phone. When we saw last time Jio launching their feature phone, we saw close to approximately 100 odd million subscribers who want the Jio feature phone, let’s say, over a period of 12 to 15-months. Now how do you look at these phones? Or assuming they end up gaining obviously some kind of a subscriber base, last time we did see showing from most of the competitors it helped Jio, so how do you look at your base and the impact on that base on the back of launch of this phone?

Ravinder Takkar — Managing Director and Chief Executive Officer

So, again, Sachin, a very, very important question. So let me start off by saying it’s impossible for me to comment on the phone that they are building. Of course, I don’t have any information and knowledge, that is not public already. And who knows what that phone will do, what the pricing will be and so on, that’s obviously time will tell on that part.

I can tell you how we look at this segment and market and maybe I’ll take two, three minutes to describe that. First of all, if you look at the Indian 4G smartphone market, and when I say 4G smartphone market, I’m talking about subscribers who use smartphones the way smartphones are designed to be used. If you just have a smartphone like my mom does, but never does anything other than make a voice call, then you can have a smartphone, but doesn’t necessarily mean that you are, well, using our smartphone.

If you look at that market specifically, only 2% of the smartphones that are sold in the market are less than INR5,000. What does that mean? That means if you want to have a good experience on 4G, if you want to use a smartphone for [Indecipherable] that is made for, which is taking pictures, sending pictures, doing e-commerce, doing other social media type of activities, you need a quality smartphone, which unfortunately today in whatever pricing that you do, the cheapest pricing that you do, is more than INR5,000. It’s cost a little bit more.

So our view in this market is really to say that we believe the best option is for us to make decent smartphones available to our customer base, but if the OEMs, as well as NBFCs and allow our customers to purchase these smartphones in a manner, which is financially suitable for them, which is really on instalments that they can buy. They can also buy used phones through our programs in instalments. And there, first of all, you provide choice to customer, because having a SKU of one or maybe two doesn’t necessarily give choice, because smartphone is a very personal item.

Secondly, it also gives you the ability to choose the price point that you want. Some may want INR8,000, some may want INR10,000 or INR12,000, because you can afford more, but you get a good quality phone in an instalment base. This is our belief in giving customer the choice and the ability to finance. We believe it is the right way of doing it rather than taking a phone, which maybe has been pushed to the limit in terms of pricing, then on top of that potentially subsidizing it and so you have to put a lot of money on the table to say I would pay, I would subsidize this much to — for you to take the phone. I think, it’s not — in our view, it’s not providing the right choice to the customer.

So we believe that our model is the right one and I think that’s the one that we are focused on. We are certainly not looking to take phones and subsidize them heavily to sell as part of the — our packages. But, I think, we believe more in giving choice and allowing those instalments to take place and I think that is, in my view, the right model. So that’s all our focuses. What they will do, I guess time will tell.

Sachin Salgaonkar — Bank of America — Analyst

Okay. Thank you for that. And all the best, Takkar.

Ravinder Takkar — Managing Director and Chief Executive Officer

Thank you, Sachin.

Operator

Thank you. The next question is from the line of Chen Samuel from AllianceBernstein. Please go ahead.

Chen Samuel — AllianceBernstein — Analyst

Hi. Good afternoon, team.

Operator

Yes, we can hear you.

Chen Samuel — AllianceBernstein — Analyst

Okay. Hi. How are you, guys? This is probably less of question, but more of a discussion in this start. So, so far, we have heard about quite a bit of ARPU pressures and everything else and it’s — discussion with — from Sachin talking about the entry level customers as well. But when I see Vodafone Idea on next year, Vodafone Idea, the premium brand is the first thing that I think about. And if I look at your current subscriber, yes, you have been losing 11 basis — 11% more shares since the merger, but those are — most of the customer you lost are in a way entry level customers, people pay INR50 to Jio most of the time. You have majority of the wealthy regions in India’s.

And if I remember correctly, I overheard on Bharti’s call, Vodafone Idea and Bharti jointly together owns more than 80% of India’s high value customers. The highlight value customer really are not susceptible to what happened to you during the pandemic, but the past few months as well. You have the best spectrum asset in India. And you have a very good network. When I visited Mumbai — I was in town by the way.

Why can’t you charge — instead of thinking about subscriber, which is important for scales. And I have heard from Bharti that they will follow if anybody raise price. Like you said it multiple times. Why can’t Vodafone Idea raise price on certain segments, where they are less price sensitive? And what are some of the thoughts there, increasing those revenues? Because, I’m sure, if you are able to work with the high-end customer, getting a little bit of revenue over there, that will also help with the fund raising and the other stuff — in your side. Just wanted to hear some thoughts on your side. Thank you.

Ravinder Takkar — Managing Director and Chief Executive Officer

First of all, Samuel, thank you very much for your comments and your observations. I think we feel in terms of the quality of our subscriber base, the quality of our network as well as the premiumness of our brand, I think we feel exactly the same way, as well as the spectrum assets that you have pointed out.

I think the debatable question, maybe this is something that we need to take a little bit more offline as well, because it’s a lengthier discussion. The only comment that I can make is that today there are two things that you have to think of. One which is, Vodafone Idea is already at a premium to — given the market today. So it’s not that we are at parity. We are already at a premium. So I believe is Airtel as well, that’s the first thing.

The second part is, from a segment perspective, which is a high-value customer that you talked about in the base and in the market, the postpaid market, which is the high-value customer is pretty much — we are still one of the largest ones in the country and so is, I believe, Airtel has a large base there as well. That is at a further premium to the prepaid customers and prepaid pricing. So, frankly, from a pricing perspective, we have already, in my view, pushed the envelope and we continue to raise. We look at opportunities where we can — in particular segments we continue to raise that, but we have already pushed the envelope for raising prices. Because we are already at a premium and then in HVC, which is the postpaid market, we are further at a premium compared to be prepaid.

I think to some extent, even though, as you said, there are certain set of people, who are completely price insensitive, I think generally the challenge that you end up and this happens mostly in national marketing is, that if you decrease prices, it doesn’t matter. It’s very difficult to do it only for a particular segment. And if you increase prices, many times if you don’t change it for another segment, people do tend to or think about downgrading, which sort of in a way doesn’t necessarily need to — the growth that you overall looking for.

But I agree with you that, first of all, pricing needs to go up. We are already at a premium and that the premium set of customers and we continue to push this envelop further every time we get an opportunity. But I think this is probably a discussion that we should have in more detail at the right time. I’m happy to do that with you offline.

Chen Samuel — AllianceBernstein — Analyst

Okay. Thank you. Thank you for your replay. Best of luck.

Ravinder Takkar — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Pranav Kshatriya from Edelweiss. Please go ahead.

Pranav Kshatriya — Edelweiss — Analyst

Yes. Thanks for the opportunity. I have only one question. I want you to talk about the ARPU differential. If I look at the competition ARPU, it’s significantly higher versus Vodafone Idea. And earlier there was an expectation that you will basically let go of some low value customer? And what is important to note is that, this ARPU differential has persisted despite 4G addition sort of coming your way, at least in the last few quarters. So what exactly is leading to that is what I would like to ask? Thank you.

Ravinder Takkar — Managing Director and Chief Executive Officer

So maybe I’ll just start and then Akshaya can add more to it. I think the — some of the important part is the reason — first of all, our pricing in the market is very similar to the pricing, for example, with Airtel. And the only reason why our ARPU is lower than them is due to the mix of how many 4G unlimited customers we have in our base versus how many 4G unlimited customers they have in base versus the low-end customers. So it’s only a matter of mix.

But I don’t have data on them specifically, but I have no reason to believe given again the size of the postpaid base that both of us have as well as — that from a customer perspective, we are — I don’t think there is any reason there should be an ARPU differential with them or not. It’s really purely a matter of mix. So then we report our overall ARPU based on the blended mix. It obviously looks like we are lower than them, which we are based on the mix that we have. Not that we sell products cheaper or we have a customer base that is lower value for the same set of services that we offer.

I don’t know if that answers your question. Akshaya, if you have anything further to add.

Akshaya Moondra — Chief Financial Officer

So the only thing I’ll add is that, I think, some of it is also coverage related and where we are not able to increase our 4G subscribers as we would want to or convert our 2G subscribers to 4G is where we currently lack in 4G coverage, and that is an area we will address going forward.

Pranav Kshatriya — Edelweiss — Analyst

Okay. But, I mean, I just wanted to gauge, you had talked about the low ARPU customers, sort of, trimming them and which will sort of drive up the ARPU, and that’s why you had earlier basically minimum ARPU plans were introduced, so — but that doesn’t seem to have created too much of an impact, or am I missing something else?

Ravinder Takkar — Managing Director and Chief Executive Officer

No, I think the — as for 4G customers go up, ARPU does go up. Akshaya also mentioned quarter-on-quarter here as well. It doesn’t — once you do the calculations on the RR basis, the ARPU this quarter has also gone up. And the new additions for broadband 4G customers that come in, they obviously come in at a higher ARPU. I think we are not trying to drive away somehow low value customers. I don’t think that — not sure with the other. Our intention is to say, we want to drive them away. I think what we want to do is, obviously, has they choose to convert from 2G to 4G, we want to be the operator that they choose for that journey.

In some cases they do, as you would have seen again in our numbers. In some cases, if we are in an area where I do not have 4G coverage, because I am disadvantaged today on some 4G coverage, then of course I don’t have that option to key to retain that customer. But we are not trying to drive away any particular low value customer to say. What we did not want was, set of customers who are there who do not pay us anything, but end up using the network, which is why there is a minimal validity plans that are there or minimum pricing plans that are there, who want to maintain that. I think that’s the strategy.

Hopefully that helps with the answer.

Pranav Kshatriya — Edelweiss — Analyst

Yes. Thank you so much.

Ravinder Takkar — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to Mr. Ravinder Takkar for closing comments.

Ravinder Takkar — Managing Director and Chief Executive Officer

Thank you, Margaret. So to conclude, I think it’s fair to say that these are challenging times for our country, as well as for our organization. I think we’re also aware of the fact that our duty and the critical role that we play in connecting the nation and we remain committed to doing that to help our employees, customers, vendors and partners in every possible way.

We also keen to provide uninterrupted services and an exceptional quality of service and we remain committed to be the best 4G network in the country and in current also remain committed to our strategic intent. I want to thank each one of you for joining this call. Please stay safe, and have a good evening. Thank you very much.

Operator

[Operator Closing Remarks]