It's do-or-die situation for Vodafone India. After the launch of Jio, the incumbents such as Airtel, Vodafone and Idea are under immense pressure to respond to Jio's over-aggressive strategy for the Indian market.
It seems Vodafone India has set the ball rolling. The company recently announced that it has received the highest-ever FDI (foreign direct investment) from its parent Vodafone Group of Rs 47,700 crore in the first half of the current fiscal.
The equity infusion is aimed at retiring debt and buying airwaves in the upcoming telecom auctions. In the past nine years since entering India in 2007, Vodafone has invested 1.15 lakh crore in the country.
Earlier this week, Vodafone launched Flex plan for its prepaid customers that aims to simplify recharge process, and claims to cost lesser as compared to its existing plans. Prepaid customers comprise more than 90 per cent of its current subscriber base.
The other two telcos - Airtel and Idea - are in wait-and-watch mode at the moment. The highest-ever FDI inflow doesn't ensure long-term future for Vodafone in India. At best, it is going to give some breather before it will come to a point where it stands today.
Right now, Vodafone India is weak on account of low 4G spectrum and unattractive tariff plans. Vodafone owns 4G spectrum (1800 MHz) in nine circles, and 3G spectrum in 15 circles. Its bigger rivals - Jio and Airtel - have 4G spectrum throughout the country across multiple bands. In order to compete in the area of wireless broadband, Vodafone will most certainly need 4G spectrum in more circles.
The current auction, therefore, is expected to be crucial for Vodafone more than other operators. Even so, the amount deposited - EMD (earnest money deposit) - by Vodafone India before the auction is still not the highest. For instance, it has deposited Rs 2,740 crore towards spectrum auctions as compared to Jio's Rs 6,500 crore, Idea Cellular's Rs 2,000 crore and Airtel's Rs 1,980 crore.
EMD shows the level of interest from a telecom operator. The department of telecom has put on sale a total of 2,354.55 MHz for auction in all bands with a combined reserve price of Rs 5.66 lakh crore. The company has recently launched Flex plans for its prepaid subscribers. So instead of buying talktime or high-speed data separately, the customers will buy flex which can be used for anything - data, talktime and SMS.
At a time when Jio is offering free voice calls for lifetime, it is to be seen that how many consumers will pay for Vodafone's voice service. Even an apple-to-apple comparison of Jio's data tariffs with Vodafone shows that Vodafone's data rates are priced higher.
Vodafone can make the best of this capital infusion by going for initial public offering (IPO), and build yet another war-chest to operate in the highly-competitive market. Vodafone is mulling IPO for several years but the plan was never materialized due to its long-standing tax dispute with government agencies.
The debt reduction, more spectrum, high subscriber base, and healthy balance sheet can contribute significantly in raising fund from the primary markets. Vodafone's standalone debt stood at Rs 81,500 crore in 2015/16.
At present, it has the second-largest subscriber base of over 200 million (after Airtel) with 22.5 per cent revenue market share. Perhaps, Vodafone can leverage this big announcement to step up its fight against telecom biggies like Jio and Airtel.