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Edited Transcript of IDEA.NSE earnings conference call or presentation 29-Jul-19 9:00am GMT

Q1 2020 Vodafone Idea Ltd Earnings Call

Pune Aug 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Vodafone Idea Ltd earnings conference call or presentation Monday, July 29, 2019 at 9:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Akshaya Moondra

Vodafone Idea Limited - CFO

* Balesh Sharma

Vodafone Idea Limited - CEO

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Conference Call Participants

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* Kunal Vora

BNP Paribas, Research Division - Analyst

* Manish Adukia

Goldman Sachs Group Inc., Research Division - Equity Analyst

* Pranav Kshatriya

Edelweiss Securities Ltd., Research Division - Research Analyst

* Rajiv Sharma

SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research

* Sachin Shrikant Salgaonkar

BofA Merrill Lynch, Research Division - Director

* Sanjay Chawla

JM Financial Institutional Securities Limited, Research Division - Research Director

* Sanjesh Jain

ICICI Securities Limited, Research Division - Research Analyst

* Varun Ahuja

Crédit Suisse AG, Research Division - Associate

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen. This is Margaret, the moderator for your conference call. Welcome to the Vodafone Idea Limited conference call. (Operator Instructions) Please note that this conference is being recorded.

We have with us today, Mr. Balesh Sharma, 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 include certain forward-looking statements and must be viewed therefore in conjunction with the risk that the company faces.

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

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Balesh Sharma, Vodafone Idea Limited - CEO [2]

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Thank you, Margaret. Hello, everyone. On behalf of Vodafone Idea, I welcome all participants to this earnings call. On 26th, July 2019, our Board of Directors adopted the audited results for the first quarter of financial year '19, '20. The detailed press release, quarterly report and unaudited results have been uploaded on our website. I assume you had a chance to go through the same.

As usual, I will first share an update on the various strategic initiatives we have undertaken, followed by operational highlights for the quarter, after which, I will hand over to Akshaya to share with you the company's financial performance for this quarter.

Let me start by reiterating our 5 pillars of the strategy, which has been shared with you in the past. The first pillar is to accelerate the integration; second is to prioritize investments; third, to drive ARPU through simplification; fourth, to focus on fast-growing revenue streams and partnership approach to drive value; and fifth, strengthening our balance sheet.

This road -- strategic road map is our blueprint basis which all of this should be undertaken towards improving revenue profitability, cash flows and our competitive position in the market. Let me elaborate on the progress we've made on each of these 5 pillars.

Firstly, on integration. We continue to execute on network integration extremely well, which remains our topmost priority. Following completion of the network integration in 10 circles in quarter 4, our integration continues to move at a rapid pace cluster-by-cluster in the remaining circles. We've already completed integration in major cities like Bangalore, Jaipur, Agra, Lucknow, Hyderabad, Ahmedabad, Rajkot, and Trivandrum. As of June end, we had completed the network integration exercise in 452 out of 681 districts, there are 66% of our districts were already integrated by then. These districts account for [66%] of the population of the country and cover more than 50% of BIL revenue base. This was report card for until June end. But between then and now the list has already expanded. We had, for example, completed the 4G integration of Orissa in Q4. But 2G, 3G integration was supposed to be in Q1, that got slightly delayed due to the Cyclone Fani. Despite the severe on-ground challenges, our team strived hard and recently in the last weekend, has completed the integration there, taking the integration circle counts now to 11 circles. The customer district proportion has also accordingly moved to 70% as of today. We're just checking extremely well on integration, and we're confident of concluding this exercise in latest by June 2020 and results in our earlier meetings and calls with all of you.

In addition to the spectrum and radio consolidation and the integrated circles, we have carved out an additional carrier from 2G to 4G in 8 circles, adding 18 megahertz to our 4G spectrum. As of today, in several key circles, Delhi, Mumbai, Kerala, Gujarat, Haryana, M&G and Karnataka. We have refarmed 900 megahertz to offer 4G using dynamic

Spectrum refarming to the circles we've talked about earlier. This adds another 70 megahertz spectrum in select locations and sites where the same has been done. We are in the process of extending the 900 megahertz offering to other circles as well. In connection of 4G in 900 megahertz band has significantly increased the coverage footprint in our key cities, especially the indoor reach in competitive markets and also improving the voice experience to VoLTE.

Additionally, we have refarmed 2,100 megahertz spectrum from 3G to 4G in 7 circles on select locations, where the 3G traffic growth was limited as 4G traffic was increasing. The additional 70 megahertz and 2,100 megahertz spectrum was released from 3G to 4G band, which helped us to increase the 4G capacity and that further translated in better customer experience in these geographies.

Based on the customer user strength, we will continue to refarm 3G spectrum to 4G in the remaining circles. As a result of all these moves in the integrated circles, the download speeds here have improved anywhere between 50% to 70% in various geographies.

Apart from the integrated circles, our network activities continue in the nonintegrated circles, so one, of course, cluster-by-cluster parts of those circles have been integrated already. Second, even the sites that are not directly progressing with the integration, we are working there in terms of deployment of TDD and Massive MIMO and these are using (inaudible) as well. As a result of the TDD, Massive MIMO deployment and integration, we have now come to a first quarter where our increase in capacity, so the breakup of capacity that we ran into in the quarter, has been higher than the traffic growth of the quarter. This reflects in better customer experience where the speeds and therefore better customer experience in these circles. We already are ranked #1 or #2 for at least one of the 2 brands in 14 circles in the country through the basis of 4G speeds for the month of June. As certified by Ookla, we now offer fastest 4G throughput in circles of Delhi, Chennai and West Bengal.

The progress on network integration is clearly reflecting improving network KPIs across all circles, which are then to announce enhanced customer experience as we talked about, however, there's a clear time lag between, first, integrating the network and being able to stabilize the network and getting it to the best shape that we desire, also the declared gap between network actual performance versus the perception that the customers say due to the relatively poorer performance in the previous quarter and there's a wide customer perception that we are now earning several hyperlocal promotional campaigns targeting the specific cities and districts to advertise our net payer's improvement in network experience and to improve customer awareness, therefore, about our brands and network improvements. We're confident that this will lead to better subscriber additions over time.

As a result of the integration exercise, we have removed surplus equipment from nearly 38,000 sites, of the total 73,000 co-located sites further benefiting our cost base. As of June end, we're pleased to announce that we've achieved 70% of our target synergies. Long story short, we are moving at a great pace and are well placed to realize full OpEx synergy of INR 84 billion by June 2020. This was about the strategic pillar 1.

Moving to prioritizing investments in profitable areas. As previously shared, in the conventional approach of focusing on service areas, we have segregated districts in 4 quads, so going to the next level of granularity. Segregating with a strictly 4 quads on the growth potential and revenue contrition of the company. In high potential districts, which are part of quad a and quad b, our focus is to target 95% coverage, so being customer experience and therefore, higher market share. We've added over 15,000 4G, 3G sites during the quarter to augment our 4G capacity and most of the deployment -- deployed capacity has been in these districts.

Further, we continue to aggressively deploy Massive MIMO, which is a 5G project technology we've talked about bringing forward into 4G. We have deployed 4,400 incremental Massive MIMO directives during the quarter. Therefore, to-date we have deployed over 6,700 Massive MIMO. It's the second largest deployment of this technology in the world and makes us unique in this country as the only telco, which is really doing any significant level of deployment of this Massive MIMO technology. And this means that in our higher priority districts, hotspots with Massive MIMO deployment, our capacity enhanced customer experience will stand out.

We're progressing extremely well on capacity creation front on a consolidated network integration activities, including spectrum consolidation and refarming, coupled with TDD and Massive MIMO deployment, our capacity is now more than 1.5x that of our September 2018 capacity. With [subscriber] capacity expansion, utilization level and conditions have come down. We therefore, remain on target to increase our capacity 2.5x by March 2020 compared to the September 2018 as shared during our previous interactions.

This quarter, our 4G updated sites have increased by 6,477. Our overall broadband site count stands now at 393,000 as of June end. The redeployment exercise is still underway, and the broadband sites count and subsequently, the population coverage was further improved on completion of this exercise. We've also added more than 8,600 mall sales to-date to improve our coverage in dense urban areas.

Our 4G population coverage stands now at 68.6%, which means 830 million Indians were covered as of 30th, June 2019 compared to less than 50% for each of the branch, I may remind you, in August 2018. This means on 4G, we now provided incremental coverage to 338 million Indians for Vodafone brand and 229 million to the Idea brand. We remain on target, therefore, to have 1 billion people covered with our 4G by FY '20 end. Overall, 4G coverage stands at 68.6% and nearly 80% in our higher potential districts, we are -- and therefore, there, we are on plan to reach 95% of 4G population and coverage by March '20.

In other districts, we are rapidly consolidating traffic on the stronger of the 2 networks and rationalizing the weaker of the 2 networks. By the end of this quarter, we exited 14,000 sites. Predominantly (inaudible) areas. This exercise enabled us to reduce operating expenses as well as improve the coverage and experience for the weaker of the 2 networks earlier without impacting customer experience for the stronger brand and we continue to have revenue therefore from both the brands.

Moving on to the third pillar of ARPU improvement via simplification, rationalization and upselling. In line with our second strategy to simplify customer offerings, we had launched service validity vouchers on minimum ARPU plans in Q3 at price points of INR 35, INR 65 and INR 95 offering bundled voice data to our customers for a period of 28 days. This quarter, our subscriber base declined to 322 -- 320 million from 334 million primarily due to churn of the low ARPU customers, who were on these minimum ARPU plans. We've taken several market initiatives offering higher value proposition to the low ARPU segments to arrest churn. What we are realizing is that these customers reach out with INR 35 or one of these vouchers once, second time and third time and then therefore, start looking for value and better value somewhere else.

For answering such needs, we have come up with a voucher of INR 45. We tested this in 4 markets. This voucher offers full talk-time to the customers and give a talk time at 1 paisa per second, which means for the 28 days that a customer has to use these benefits in, the customer gets a much better value than INR 35 of just a marginal increase of INR 10 on the same. The initial indication from the 4 circles were very encouraging and therefore, last week, this product has now being taken all India and we are confident of improving both churn as well as ARPU in the coming months in this segment to this product intervention and better [offerings] on INR 69 voucher that we've earlier launched.

We have seen churn on the low-end base -- while we see churn on the low-end base, our higher ARPU base is broadly remaining the same. The churn on 4G base or therefore 4G handset base is much lower than the churn of the 3.7% that we see overall. We've seen very good response on our entry-level newer plan at INR 199 for 1GB data, which was launched in Q3, for which we've launched INR 129 and INR 139 plan of renewal unlimited voice with 2GB and 3GB fixed per month data, respectively. This quarter, we have also introduced bigger data bundles at INR 229 and INR 255, offering unlimited voice with 2 and 2.5 gigs per day to upgrade the heavy data users from INR 169, INR 199 kind of plan to the INR 229, INR 255 kind of plans.

Additionally, we've launched long validity packs at INR 599 for 6 months and INR 999 for 12 months to improve customer experience. Now that we have the capacity in the requisite market, we have been able to do these projects, which will lead to increased uptake, will lead to ARPU increase and will lead to traffic increase that we can now afford to observe. We believe all these initiatives are therefore arrest churn and improve ARPUs.

The fourth pillar of our strategy was to focus on fast-growing revenue streams and partnerships to drive value. Vodafone Idea continues to maintain leadership in the enterprise mobility space with focus on growing segments of IoT solutions, cloud offering and carrier services, et cetera, while leveraging Vodafone Group's global enterprise relationships. Vodafone Idea Business Services has been recognized at the Frost & Sullivan ICT Awards 2019 as Enterprise Telecom Service Provider of the Year for the SMB segment, third time in the last 4 years. Also, we were awarded Managed Enterprise WiFi Provider of the Year and Enterprise Mobile Service Provider of the Year for the eighth time in the last 9 years. We continue to do well therefore in this segment. Our enterprise mobility base grew this quarter by (inaudible) on the retail (inaudible).

On content, we continued our partnering with the best-in-class rather than trying to own the value chain. Our list of partners now includes the likes of Netflix, Amazon Prime, Sony, Zee, Eros, Sun, Shemaroo, Hoichoi, TV Today, Discovery and the list continues to grow longer. As a result, we have witnessed in the last quarter alone 27% increase in our average viewers and 23% increase in the minutes of viewership.

On the partnership on music streaming services, whilst it's taking longer than we expected it to launch, it's in progress and we'll keep you posted on the same.

Our strategy and partnership exchange way beyond just content. We partnered with various managed service provider, e-commerce, retailers like Amazon, along with Google and Facebook and other such content providers, provide values for both the partners as well as our customers.

The fifth pillar was about strengthening our balance sheet. This quarter, we received INR 250 billion in proceeds on the successful completion of the rights issue. The merger of Bharti Infratel and Indus Towers is also expected to close very soon. Vodafone Idea's 11.15% stake in Indus has an implied value of INR 56.3 billion as of June end, which we plan to monetize on completion. We are also exploring options to monetize over 159,000 kilometers of intra-city and intercity fiber, which will provide us further financial flexibility.

Moving on to the operational highlights for the quarter. As previously mentioned, this quarter was impacted by churn of customers who had recharged on service validity plans in the prior quarters. Additionally, we've seen some down trading of high ARPU customers primarily as the customers move from unlimited voice and data plan, pricing INR 169 plus, to the unlimited voice and fixed data plan, which are priced lower at INR 119 or INR 129 as the primary needs for these customers was really voice.

What we expect is that the churn of customers on minimum ARPU plan and the downgrading of high ARPU customers led to the revenue decline of 4.3% this quarter. However, it's important to note that we have seen much better addition of viewer subscribers in almost 45% of the district resulting in positive revenue growth in these districts in spite of churn of the low ARPU customers.

We also witnessed some disruption in our distribution channels post the integration that we completed in Q4 impacting us during the quarter. However, it's now behind us, so technically -- not technically -- Tactically, it's gone and changed our distribution across the country. Across the country in every geography in every village, there were 2 distributors, one distributing Vodafone and the other distributing Idea products. We've gone in the Q4 and created a single distribution led across the country who distributes both the products, which means every distributor, the better the 2 distributors has been retained but this distributor goes to retailers selling the one of the 2 brands for the first time, and so also the KPIs. This has taken some time to stabilize the distribution KPIs were under pressure but now we're gaining strength on that as well and the same thing now being able to -- very sooner to be able to sell both the brands and stock both the brands on to the counters. Overall, our channel reduced to 3.7% during quarter 1 compared to 7.2% in quarter 4. ARPUs have also improved sequentially to INR 108, up 3.8% Q-o-Q versus INR 104 in quarter 4 of '19.

On 4G subscriber front, we added 4.1 million 4G subscribers, taking overall 4G base to 84.8 million subscribers now. As we continue to improve our 4G coverage and capacity to network integration and fresh CapEx, coupled with other market initiatives on pricing, we expect to bring the momentum and improve our 4G net adds.

What we have been seeing in our integration journey is that it takes some time to first stabilize the network, then to be able to build perception, get our distribution rights. But when we come back to KPIs of the integrated geographies versus -- or integrated districts versus nonintegrated districts, we see clearly better performance on speed, as I already mentioned, 50% to 70% speeds measured on (inaudible) spectrum that you are all aware of. Better speeds is leading to better 4G extraction, which means better 4G subscriber addition in these markets versus those not integrated. This is also leading to better (inaudible) addition in these markets versus those not integrated.

Now remember with our integration strategy was to first integrate the quad c and d districts quicker than the a and b and therefore, of course to be able to move faster in these districts and be more careful when we go to a and b. Also, there are couple effects, we need to carry the equipment that has been just installed from these districts to come in or capacitize the other districts that have been still low. Therefore, net-net, the integration versus nonintegrated KPIs improvement that we have seen and that's giving us a lot of confidence is still to happen in our strength markets and therefore, will give us even better results in those markets is happening.

Moving on, another update is that on 19th of July 2019, the Board of Directors of our associated company, Aditya Birla Idea Payment Bank Limited has approved voluntary binding up of ABIPBL subject to regulatory approvals. The merger of Vodafone M-Pesa or VMPL with ABIPBL has thus, been called off and the business of prepaid payment instruments and the business correspondence are in the process of closure. The rationale of this call being several changes that have happened, both in terms of the regulation relating to payment bank and also the general health of the telecom industry. So at the time, payment bank was conceptualized.

The continuing losses have since the long-term business case and holistic evaluation of the situation led to the decision of binding up of the businesses. Also, this was in line with our strategy of focusing on our core businesses ourselves and doing the rest value-creation through partnerships. Now that we are proposing to not have the payment bank as well as the M-Pesa business, we will not have the (inaudible) with our own [managed] companies that we have carried, we will be able to (inaudible) of our own, explore the marketplace, and we are already doing that to be able to partner with FinTech companies whose products we can distribute and sell.

To sum up, we are very well on track on our strategy on all the 5 pillars.

At this stage, I'll hand over to Akshaya to take you through the financials of the company.

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Akshaya Moondra, Vodafone Idea Limited - CFO [3]

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

As explained by Balesh, the churn of low ARPU customers, coupled with ARPU down trading has resulted into revenue decline for the quarter. The revenue for the quarter was INR 112.7 billion as against INR 117.8 billion in Q4 FY '19. We have adopted Ind AS 116, with effect from April 1, 2019. As a result, lease rentals are no longer part of network expenses and other expenses and accordingly, these expenses are lowered by INR 23.3 billion and INR 0.8 billion, respectively.

Consequently, EBITDA for the quarter increased to INR 36.5 billion versus INR 15.9 billion after adjusting for one-off credits of INR 2 billion in Q4 FY '19. On a normalized basis, revenue declined of INR 5.1 billion has resulted in INR 3.5 billion drop in normalized EBITDA.

We remain on track to achieve synergy targets and have achieved incremental synergies during the quarter, which is partially offset by EBITDA decline due to revenue fall. Our overall operating costs, excluding license fees and spectrum usage charges and roaming and access charges are reduced by INR 14.8 billion, post adjustment of inflation-driven cost increases and incremental network rollout as compared to Q1 FY '19 pro forma operating costs. This translates to achievement of 70% of our stated synergy target of INR 22 billion.

The depreciation and amortization and financing costs net for the quarter are INR 61.3 billion and INR 34.4 billion, respectively, higher by INR 15.1 billion and INR 7.3 billion, respectively, due to adoption of Ind AS 116.

Exceptional items at INR 8.1 billion during the quarter include integration and merger-related costs of INR 2.3 billion, and noncash impairment charges of INR 5.8 billion. The impairment charges include impairment of investments in the Payments Bank and M-Pesa entity of INR 2.1 billion following the decision to discontinue the Payments Bank wallet and business corresponding businesses in the respective entities. The remaining INR 3.7 billion of impairment is either on account of [WGV Equipment], which is becoming circular or the historical installation and services costs for equipment which has been redeployed to new locations on account of ongoing network integration.

CapEx for the quarter stands at INR 28.4 billion. Post completion of our rights issue, our net debt has reduced to INR 992.6 billion as against INR 1,183.9 billion in March '19. The cash and cash equivalents balance as of June '19 is INR 211.8 billion.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question from the line of Sachin Salgaonkar from Bank of America.

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Sachin Shrikant Salgaonkar, BofA Merrill Lynch, Research Division - Director [2]

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I have 3 questions. First, I wanted to have a little bit more color in terms of revenue decline. Balesh, you did mention that you saw down trading because consumers are moving from voice and data pack to voice. So just wanted to understand what steps are we taking to prevent that, or do we see further room in terms of a little bit more decline per se from a down-trading perspective? And again, are most of the low-end consumers out of your network or, again, you see a bit more room in terms of reduction out there?

Second question, you did mention that 70% of your synergy target is already achieved. I wanted to understand, do you see any incremental more levers as you integrate, which you guys could focus in terms of cost control?

And third question is to Akshaya. So Akshaya, thank you for providing the net debt, excluding lease liability. Can you also provide what is the lease liability then?

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Balesh Sharma, Vodafone Idea Limited - CEO [3]

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Thank you, Sachin. So taking the first question. First on revenue decline and you wanted some color on that. So basically, I could break the revenue decline in 2 parts but then there's 1a and 1b on that. The first part we talked about was the decline in the low-end, low-ARPU subscribers. This is a and b as in one is the direct impact of customers leaving and therefore, the ARPU they take away for what it was number that we have talked about, it becomes large enough. And second is the impacted sales on reduction in incoming volume of traffic because these were typically has been used only for incoming and therefore, when it goes down and even at current IUC there's a decline that, that causes.

Second part is the down trading in terms of mix of the unlimited customers moving -- the guys who are on unlimited voice and data going down to unlimited voice. So first one, as I said, what we're trying to do is arrest the churn of those customers. So we try to understand why are they leaving us after a couple of recharges, sometimes 2, 3, 4 recharges already in the INR 35-plus kind of category, and then they get into a value-seeking mode we see and then they try to start comparing with the same, is life better with going to an unlimited if they can have one. And in that situation, when they go to the market, in many markets, given our integration is still happening, either in reality or in perception, we're still not on top and therefore, the choice may be made for us or against us and the odds remains stacked up against us on that.

So we have to try and therefore, give them value where they are and that's why the INR 45 voucher, that's INR 10 more, gives them a hell of a lot of more talk time, which is typically what they're looking for. As I said, early days, but with the 4 circles, and that's why we very quickly gone into earlier launch of it, it gives you a much better reception and much better customer behavior on uptick as we saw already.

This INR 45 also comes with a INR 25 capping on the 28 days, which means in case, so you get a lot more value. However, if you don't use it within 28 days, there's a forfeiture of it. So therefore, it's a win-win, customer gets a lot more but has to use within the 28 days unlike the INR 35 [contract], which did not have this. So this is -- it's giving us confidence on both getting the revenue up, getting the uptick in terms -- and getting the churn down on the non-UL part of it. On the UL part of it, one, we have tried to take the INR 119 up to INR 129 in the middle of last quarter, so stabilizing, INR 119 to INR 129. We've also launched a INR 139, which give a slightly more data, so 1 gig in INR 119, with 1 gig or 3 gigs in the INR 129 and INR 139. That's the inflection and therefore, that will mean the voice customers' ARPU, say, if I separately see a ULV cohort now, the ARPU of that customer is up.

On the ULV side, taking advantage of the incremental data capacity that we now have, we are firing up higher plans like INR 229 and INR 255. Uptick of those customers is going to be a major number going up but whatever goes up there, those numbers are all higher users and therefore stickiness and higher revenue coming in from there. So that's the attempt on the revenue decline part section. Of course, the fundamental -- there was fundamental attempt is to increase our 4G coverage and capacity and integrate as quickly as we can. I will not repeat all that. But as I look at my customer base behavior right now, the churn in 4G covered geographies versus not 4G-covered areas, there's a substantial difference between the two. So with every incremental managed account that are covered with 4G, it will help us on reducing the churn.

First, on your question one. On the synergy targets, so very good question, synergy targets, 70% already in bank in terms of annualized numbers, very encouraging. However, what's next? Synergies such as -- so far when we call it synergy, it is typically coming from deduplication of cost and not really transformation of cost. We had taken a conscious call to create the new company with spot -- carefully spot the duplicate, we get that right and then the second step of relooking the cost and trying to see whether there's another way of doing business. As I shared once earlier, we started that exercises at early days right now, we've hired one of the big 4 consultants to work with us on this. We're looking at every part of cost as well as revenue engine of course to look for more opportunities, and there are many more opportunities. I can't right now give you guidance on the number. May be by the next quarter call. But we are very optimistic that with the 2 companies coming together, cost base stabilizing on this 3G side, we will be able to relook the cost components and take out substantial amount of cost further. Over to Akshaya for the third question.

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Akshaya Moondra, Vodafone Idea Limited - CFO [4]

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So Sachin, in this quarter, we have given complete head-by-head impact of the adoption of Ind AS 116 on the P&L line item. As far as the balance sheet is concerned, we'll be able to explain more in the next quarter and we will give the complete balance sheet in any case as required.

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Sachin Shrikant Salgaonkar, BofA Merrill Lynch, Research Division - Director [5]

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Okay. Got it. So just one follow-up to Balesh. So Balesh, you again, touched on winding off some of the nonprofit businesses mainly on the Payment Bank. So just wanted to understand your thoughts as and how you look at, let's say, looking at some of the cost opportunities, whether you guys are having some thoughts in terms of revisiting your presence in some of the quad c, quad d areas, which is pretty nonprofitable from that perspective.

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Balesh Sharma, Vodafone Idea Limited - CEO [6]

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Good question, Sachin. So this is in line with the quad strategy of ours. We have already in the sense that we are visiting the c and d and for that matter, even within a and b, if there are geographies where we have an overlap of the 2 sites and not commensurate return on the presence of those sites. We talked of 22,000 site exits as a result in those -- in that exercise. So far, we have existed 14,000 more -- sorry, 14,000 sites through those exercises. We have therefore, some room to go on most sites exists over there. Do I see it going way beyond 22,000 sites? As of just now, probably not. So we will stabilize at 180,000-odd sites and 78 is what the synergy target of ours is was. So still keeping it around that.

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Operator [7]

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The next question is from the line of Pranav Kshatriya from Edelweiss Securities.

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Pranav Kshatriya, Edelweiss Securities Ltd., Research Division - Research Analyst [8]

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My first question is, is there is decline in the revenue attributable to the decline in the IUC revenue, which you receive? That's my first question. Secondly, on the network OpEx, we are seeing flattish network OpEx despite synergy benefits coming in, of course, adjusting for this one-off which was there in the last quarter. So it's -- I mean, we were typically expecting it to come down further. So how should we see this going forward? And the last question is on the -- you talked about a disruption in the distribution channel. Can you please elaborate what sort of disruption because as I understand, the channel integration was already complete earlier. So what led to disruption? Can you quantify some of the impact, let's say, in terms of subscriber addition because of that and -- or if it is that, that disruption is felt earlier in the quarter, after normalization, how the numbers are looking like?

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Balesh Sharma, Vodafone Idea Limited - CEO [9]

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Okay. Pranav, so before I hand over to Akshay for the first 2 questions, let me take the operational question myself, which is on the disruption and distribution side. So let me explain again, that we had 2 distributors everywhere. So take any geography where we were, let's say, Navsari. We had 2 distributors there, or any village for that matter, any geography for that matter, 2 distributors. Now if you take one of the 2 distributors and make them now the new Vodafone Idea distributor, the sales team of this distributor has to go to every outlet and sell now both Vodafone and Idea. For a minute, assume this was an Idea distributor that was retained there. As an Idea distributor and his sales teams know the Idea product very well, know how to promote that product, understand the Idea business much better than they understood the Vodafone business. So there's that new relationship that they have to develop on the counters to be able to also push the Vodafone part, which took longer than we thought, though the brands obviously were already present there before, known to the retailers, but a new relationship for the distributor in terms of accounting, in terms of sales, et cetera, et cetera as well as that of a new product to be sold by the sales guy cause complication. Also the outgoing distributor then has to settle all the old age-old outstandings, et cetera and that does lead to kind of lack of stability in the distribution chain until the new distributor takes over that relationship and the accounts with the retailers. Will I be able to quantify this? Well, we saw for about 3 months -- you're right, this was completed; however, the results only started happening after completion. So we did this in end January, February sometime, end of distribution integration. But the months after that saw distribution KPIs. For example, one of the ways I look at distribution is how many outlets were activating for you or selling recharge for you and that ultimately reflects in the share of the gross additions in the marketplace measured through our switch and other ways to monitor the market development. We saw in between, which is until about May, we saw a reduction of a couple of points on our share of gross additions there, which have since come back and -- in most markets and then therefore, obviously we're tracking it very closely, street by street, base station by base station, treating each of them as a OpEx or a P&L production unit and then therefore trying to see where has it got down and how -- has it come back or where has it not come back versus the December, January figures. So coming back on most of those now, however, the impact has obviously caused somewhat of a -- sorry, disruption has obviously caused somewhat of impact, all for good reason because now as an and we have a stronger distributor of the 2 in every geography and much lesser cost than having 2 distributors to service the same retail outlet. Akshay?

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Akshaya Moondra, Vodafone Idea Limited - CFO [10]

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So Pranav, on your question of IUC revenue and has it been impacted. Yes, it has been impacted because as we say that if we look at quarter-on-quarter, the decline in number of subscribers is about 14 million, but if you look at average for the quarter, Q4 versus Q1, the decline is about 27 million subscribers, now that has impacted the revenue. Also, since these subscribers were largely recipients of incoming calls, being in the lower ARPU category, it has had an impact also on the quarter-on-quarter IUC revenue. The rough impact of this is in the ballpark of about INR 0.8 billion for this quarter, quarter-on-quarter variance. So that is as far as the IUC revenue is concerned. As far as network costs are concerned, one is that there were some one-offs in the last quarter and they were not all in network. There were some higher one-offs in network and maybe some credits and -- or the debits in other heads. If we take into account the one-offs in the previous quarter, also adjusted for incremental site rollout and rental escalation, which happens on the annual anniversary, there is some higher energy cost due to more number of working days and there is certain element of AMC cost, which has increased. If we adjust for this, roughly the synergy realization on the network cost in this quarter is broadly INR 1.5 billion for the quarter or on an annualized basis, it is about INR 6 billion for the quarter. So there is continuing benefit on the part of network expenses, which is being realized. And also, if I may just add, you see a bit because as I said that in the energy cost, we have moved to a pass-through system of billing and some of the benefits which are coming into this are reflected with a certain amount of time lag. So I believe that there is room for further improvement in the energy cost compared to what is recorded right now. But some actualization still have to happen there.

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Pranav Kshatriya, Edelweiss Securities Ltd., Research Division - Research Analyst [11]

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So this INR 1.5 billion you talked about synergy benefit is pertaining only to the network cost, right?

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Akshaya Moondra, Vodafone Idea Limited - CFO [12]

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Yes. Network and IT cost combined together.

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Pranav Kshatriya, Edelweiss Securities Ltd., Research Division - Research Analyst [13]

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Okay. And should we see further improvement in this or this should be more like a run-rate or were there some one-offs in this quarter?

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Akshaya Moondra, Vodafone Idea Limited - CFO [14]

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No. So on the network cost, there are no significant one-offs here. So generally speaking, as I said, that we have achieved 70% of our overall synergy targets. We are on track to achieve 100% synergy targets by Q1 FY '21 on an overall basis.

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Operator [15]

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The next question is from the line of Manish Adukia from Goldman Sachs.

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Manish Adukia, Goldman Sachs Group Inc., Research Division - Equity Analyst [16]

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I have 2 questions. First, you mentioned that you have finished -- completed your network integration in about 11 service areas. And now when we look at subscriber additions, especially on the wireless broadband side, that's been somewhat weak in the last couple of quarters while one of your competitors have been adding significant number of customers. What in your view will start moving this number up for Vodafone Idea, and how far away are we from that? My second question is there were some press reports recently which indicated that telecom operators recently met with the Government of India or rather the telecom minister. If you can share what are the 1 or 2 key requests that operators like yourselves have been making to the government, and are there any government initiative that one could expect to potentially improve the health of the sector in the near term?

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Balesh Sharma, Vodafone Idea Limited - CEO [17]

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Thank you, Manish. So on the broadband subscribers addition first. If you look at the 4G subscriber addition, we've had an addition of 4.1 million subscribers in the quarter. This is the net addition. You look at broadband, it is 3G and 4G mix, so 3G goes down and 4G comes up, but now being internalized and that's now 4G goes up, which means internalize as in, in that geography we've got 4G and therefore the 3G customer while going out stays on with us. This number is below what you probably expected and the run-rate that I was having in earlier quarters and that is right. Now this is a mix of 2 parts, Manish. One is addition of subscribers and second is churn of subscribers. Encouraging news from my point of view is that the addition of subscribers is higher than the previous quarters, negated by a higher exit of subscribers on 4G side. The higher 4G exit was linked to the exit in the low end -- low ARPU subscribers. Why? Because some of those guys carried a 4G handset and at sometimes used some marginal 4G data with us and therefore would show as a 4G subscriber with us. However, when they moved into a SIM consolidation post the INR 35 impact, they carried -- they [went] this SIM out into the primary SIM that could have been my other brand or somebody else's brand. And therefore when the 4G subscriber stopped being seen in my network as a 4G subscriber. So what I am -- so while we are working on reducing that churn and that already as you see overall number of customers leaving has gone down, the churn has come down to 3.7% and as that keeps improving, the exit of 4G subscribers per se will reduce. Those who are on 4G subscription and with unlimited usage, the churn there is much lesser and therefore with a growing unlimited subscriber base and new additions of 4G coming, I'm pretty -- and of course, the 4G geography is increasing, the capacitization that goes on every month -- actually, every day, I am very confident that the 4G numbers will keep going up. Will it reflect in overall broadband subscribers, depends also on 3G part of it. I am more closely watching actually the 4G and the HVC part and the UL part, which are all showing encouraging results especially on gross new additions and churn would reflect therefore -- improvement of churn will therefore reflect in reduction in that number. On the second question, very interesting about the telecom minister meeting, I do not know whether this is really the forum for me to reflect on this question, but I can give you a sense of what is already in public domain. The minister on day 1 in his office, or practically day 1, had already written to the finance ministry and other ministries talking about some of the steps he would request the government to take and these were all steps that one would want as an industry. So as -- whether it's COAI or individual operators, those were things that we had been pressing for, for example, review of levies, specifically custom duties that was increased in the previous financial year for specific reasons and situations at that time was increased from 10% basic custom duty to 20% on telecommunication. There's obviously been a request from the industry and I believe from the minister now to review that. Similarly, also GST from 18% could it be going to the slightly lower and therefore benefit uptick of customers in the industry. So that then -- and similar such other revenue initiatives -- sorry, cost initiatives is what have been talked about by the industry repeatedly in the past and the new minister has taken those up, which is very encouraging from that point of view.

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Manish Adukia, Goldman Sachs Group Inc., Research Division - Equity Analyst [18]

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Sure. Just one quick question for Akshay. You mentioned INR 0.8 billion of impact on IUC this quarter and last quarter. You had mentioned that you had net receivables of about INR 4 billion IUC. So if I'm just doing the math right, so about INR 3 billion is what you still receive as net IUC. Is that the correct number?

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Akshaya Moondra, Vodafone Idea Limited - CFO [19]

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No. No. I think don't mix up the 2 numbers. The INR 0.8 billion is the change quarter-on-quarter in the incoming IUC revenue. The other figure which we had given which you're talking about is the impact of IUC becoming from 6 to 0 and that is not a quarter-on-quarter delta, that's an absolute figure. That figure is also constantly coming down. In this quarter, that impact would be roughly INR 3.8 billion for the quarter.

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Operator [20]

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The next question is from the line of Kunal Vora from BNP Paribas.

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Kunal Vora, BNP Paribas, Research Division - Analyst [21]

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Having seen few months, are you happy with the outcome of the introduction of service validity packs? What's your assessment of subscriber loss, revenue gain loss and cost savings due to this initiative, and what proportion of customers are on the INR 35 pack now? That's question number one. Second is regarding the non-spectrum debt. What's the nature of this debt, and when does most of this debt come up for renewal? And finally, any changes to CapEx guidance? That's it.

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Balesh Sharma, Vodafone Idea Limited - CEO [22]

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Thank you, Kunal. So INR 35 voucher overall, our assessment remains very favorable for it. So it was a bold move and made sense to do that because a lot of the subscribers were not fairly adding anything major to the revenue, were incurring costs and therefore consolidation of these subscribers in -- where they were into dual SIM-ing was in interest of the company and the industry. The churn has been higher than what we thought it would be. We -- our belief was that once the subscriber chooses to be on the INR 35 voucher for a month or 2, he or she will continue to be then on this voucher for long. To repeat what I said earlier, therefore, our realization on this has been that the value on the INR 35 and INR 65 is not in line with what the customer was used to or was wanting, on one end. On the other end, we learnt that when we have not put a cap on the benefit that we give and if it is an incoming-only subscriber, it doesn't necessarily burn even the value that has been given on INR 35. So those who are relatively serious users of this product, want more value. Those who are not, despite INR 35 being there as minimum recharge per month can continue for longer than 1 month using the balance that the INR 35 gives by using it purely for incoming. Therefore, we've tried to come up with this new product of INR 45, which on one hand gives customer a lot more. On the other, necessities the usage of all the benefits we give within the 28 days, and therefore, if the customer does not use it in the 28 days, that gets forfeited. So it's a win-win to that extent. Therefore, for the value-seeking INR 35 customer who intends to use the SIM card for both outgoing and incoming, there's a lot more value loaded and therefore, the customer may not seek go into an unlimited because already sufficient talk time as high as about 70 minutes gets offered at that INR 45. On the other end, the customers who are using it only for incoming and did not intend to really pay the company anything if they could, would then have to pay in this product INR 45 with a capped usage for their INR 45 one. Over to you, Akshay.

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Akshaya Moondra, Vodafone Idea Limited - CFO [23]

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So on the non-spectrum debt, generally, it is a fairly long-term debt. I can give you some guidance that the remaining part of this financial year, the external debt, which is becoming due for repayment is about INR 41 billion and similarly in FY '21, that amount is about INR 42 billion of principal repayment. So this is fairly long-term debt from that perspective. On the CapEx guidance, I think our CapEx objectives remain the same, which were 2.5x the capacity which we had at the time of merger, 80% 4G population coverage overall and 95 percentage coverage in priority districts. We are constantly working to see that how can these objectives be achieved with further optimization of CapEx whether it is in the form of better pricing or it is in the form of better configuration and network planning, so those exercises are on, but our objectives of achieving coverage and capacity remain unchanged.

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Kunal Vora, BNP Paribas, Research Division - Analyst [24]

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Sure. So would you say that there is a downward possibility and not really a upward revision possibility from what you guided already?

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Akshaya Moondra, Vodafone Idea Limited - CFO [25]

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Yes. I don't see any possibility of any upward movement. There could be some downward improvement based on the factors that I just explained to you.

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Operator [26]

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The next question is from the line of Rajiv Sharma from SBICAP Securities.

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Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [27]

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Couple of questions from my side. Firstly, Akshay, you just mentioned about external debt, INR 41 billion this year and INR 42 billion next year. If you can just confirm that number. And what is the spectrum usage charges, which are payable to the government in this fiscal year and next fiscal year, please? Second question is to Balesh. Now that you have brought down the distributors from 2 to 1, do you think the next movement will be bringing down Vodafone and Idea 2 separate brands to 1 single brand given that costs are under pressure, revenues are under pressure and that is something very likely you may think of or that's a complete no-no. And lastly, this INR 45 could see further pressure on ARPU or it will not see any pressure on ARPU in your view because the way it is priced, there's a possibility that there is more pressure. So you will be okay with that if that is the outcome?

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Balesh Sharma, Vodafone Idea Limited - CEO [28]

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So let me take these questions first and then I'll hand over to Akshay for the external debt numbers. Let's start with the distribution one, first. So distribution integrated, you're saying whether we will integrate the brand therefore, but it's not a necessary corollary of this thing. We will -- we've integrated the distribution to be able to take out costs once the sales guys can be trained on both the products, which is what's happened now, then we can continue to have the 2 products separately running, technically, perennially. But as I've said before, it's an animated market, we'll keep evaluating. The cost of incrementally running 2 brands isn't very much higher than that of a single brand because it's only the A&P cost that remain now, the distribution cost and the retail cost of 2 brands having been taken out. On retail front also, if you walk into a store of brand A, the brand B customer can be serviced or sold. So cross-sell and cross-serve is already operational in most cases. Therefore, even on retail footprint, we have de-duplicated or are in the process of completing the de-duplication on retail footprint as well. So cost of running 2 brands are now tactically reduced to cost of advertising and promotion. And that, we believe, is being disproportionately returned in terms of incremental extraction that you get by being 2 brands out of 4 in the marketplace rather than being 1 out of 3, which also applies on things like retail space, et cetera, and gives you advantage of it. However, as I said, this is dynamic. We keep evaluating it, keep looking at options and we will choose a course accordingly in the coming quarters.

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Akshaya Moondra, Vodafone Idea Limited - CFO [29]

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So Rajiv, on your questions of external debt, yes, those figures of INR 41 billion and INR 42 billion for external debt principle servicing schedule is right. On the DoT installments for the remaining part of the financial year, the installment due, including the interest component is INR 57 billion.

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Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [30]

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And what about the next fiscal year?

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Akshaya Moondra, Vodafone Idea Limited - CFO [31]

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The annual installment then on a continuing basis is about INR 120 billion annually.

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Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [32]

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So do you think...

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Balesh Sharma, Vodafone Idea Limited - CEO [33]

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On the INR 45 -- sorry, go on, Rajiv.

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Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [34]

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No. No. Please, please, go ahead.

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Balesh Sharma, Vodafone Idea Limited - CEO [35]

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Yes. So I had forgotten to respond to your INR 45 question hence I came back.

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Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [36]

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Okay. So do you think this -- that you may need some more funding at some point of time given these repayments and given the pressures which are there on the business, maybe in 3 to 4 quarters?

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Akshaya Moondra, Vodafone Idea Limited - CFO [37]

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No, I don't think over the time frame that you're talking about we will need additional funding. But as we have always mentioned in the past, one is of course, as we mentioned that the Indus monetization should happen anytime once the Indus and the Bharti Infratel merger is complete. Also we have always said that fiber monetization is something which we are working on and definitely that provides us that much more flexibility and optionality of supplementing our funding if need be.

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Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [38]

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Yes, and that 40...

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Balesh Sharma, Vodafone Idea Limited - CEO [39]

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Yes. Please go on, Rajiv.

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Rajiv Sharma, SBICAP Securities Ltd., Research Division - Co-Head of Institutional Research [40]

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Yes, that INR 45 dilution.

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Balesh Sharma, Vodafone Idea Limited - CEO [41]

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Yes. Yes. INR 45 dilution. We've done various modelings. Of course, any product that you do has impact on both sides of the revenue table and this one could. But we know that there's much lesser to lose because in the non-UL, majority of the subscriber base sits on INR 35 and not on the INR 65 and INR 95. And those who are INR 95 anyway are very close to INR 119, INR 129, et cetera and can be uplifted rather than being brought down to INR 45. All the modelings that we've done indicates a clear upside on this. Then we went to 4 markets and tested it out. These are 4 voice markets mainly. So we've tested it out over there, this is a voice product. And in those 4 markets rather than down-trading, we saw clear benefits of doing it. Hence it's a all-India launch.

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Operator [42]

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The next question is from the line of Sanjay Chawla from JM Financial.

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Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [43]

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Can you share the number of unique 4G sites you had as of June end and also how many L900 sites -- how many sites on which you've got L900 now and how many we -- L900 we should expect by March 2020? That is the first question. And also second question is how many low utilization sites did you exit from in 1Q, and were most of them from ATC this time compared to the previous quarter?

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Balesh Sharma, Vodafone Idea Limited - CEO [44]

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No, Sanjay, let me start with the second one, first. Between Q4 and Q1 of this year, we've exited 14,000. I don't exactly remember the split between the 2. Sometimes you give notice in one quarter, but the impact of it only comes in when you finally remove the equipment from there because until then the rental remains due. So 14,000 so far have been exited with, I believe, equipments removed from those sites.

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Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [45]

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I'm sorry, 14,000 is the cumulative number or is that the increment?

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Balesh Sharma, Vodafone Idea Limited - CEO [46]

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Yes, 14,000 is the cumulative number. About 10,000 is what would have been over in Q4 in terms of physical removal of equipment and now 4,000 more this quarter. Now this is on the site exists. Regarding L900...

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Akshaya Moondra, Vodafone Idea Limited - CFO [47]

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On that I think there is no specific correlation with any specific vendor. Basically, we just keep on selecting the sites and keep exiting as to what makes sense. So I mean, I've not really tracked as to where have we exited more, but there is no specific quantum -- I mean, bias in favor of any particular operator as such -- tower operator, I meant.

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Balesh Sharma, Vodafone Idea Limited - CEO [48]

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And unlikely to be so, Sanjay, because these sites are widespread across the country since it's not center-specific but district-specific strategy. It flows into this 6 circles where we had predominately Indus and predominately not Indus.

On the number of LTE 900 and 4G overall, I think it's comparatively sensitivity information, we would not like to share at the moment. I have already talked about the geographies where we are doing it.

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Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [49]

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Okay. But definitely by fiscal year-end, we expect 178,000 to 180,000 overall sites on which -- and all of them would have a 4G equipment.

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Balesh Sharma, Vodafone Idea Limited - CEO [50]

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So that's the number of sites we will be. Our integration completes in June '20 and not March '20, so there could be a lag to come to that kind of a situation.

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Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [51]

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Okay. And if I could just squeeze in one question on your P&L. When looking at your other expenses or G&A cost without the impact of Ind AS 116, there is some increase quarter-on-quarter, is that due to any provisioning due to the distribution-related disruption and some bad debt provisions there, or what is the cause of that?

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Akshaya Moondra, Vodafone Idea Limited - CFO [52]

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So there is nothing on account on any disruption that you're talking about. There is some incremental bad debt provision, which is happening on account of BSNL delays and inability to pay. So I guess that is the only reason which I can figure out. Otherwise, it is more in the normal course of business.

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Balesh Sharma, Vodafone Idea Limited - CEO [53]

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The distribution impact that we talk about, Sanjay, if at all, can only have positive impact on the cost because you do that much lesser acquisition. Not a welcome reduction in cost, but that would be a reduction in cost.

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Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [54]

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So I mentioned -- you mentioned there is some receivables due on account settlement from...

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Balesh Sharma, Vodafone Idea Limited - CEO [55]

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Those are from within the distributor's money to the retail. It has nothing to do with the principal. Those are just complex market workings where for years you keep servicing a retail outlet, now you're not going to be any longer so the old files open up [indiscernible] so that you have to settle way.

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Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [56]

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You mentioned 4G churn, there has been some higher exits this quarter and mostly at the low end because obviously there's some consolidation going on there as well. What is the profile of this low-end 4G customer in terms of ARPU and spending and data usage who have churned out in the previous -- in the last quarter?

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Balesh Sharma, Vodafone Idea Limited - CEO [57]

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More often than not, Sanjay, this customer has 2 SIM cards and there's a behavior on 1 SIM card where you see him or her as a low-end customer. On the other end, this customer has got a 4G unlimited product who's continuing to use the second SIM card primarily because it would have been number circulated somewhere, so you go into MNP in one of the 2 numbers and letting it into one, or this could have been a number where OTPs et cetera were coming so you take a month or 2 or 3 to be able to change your banking details, et cetera and then finally get rid of the number because you don't want to continue to keep paying. Now since this customer was using 4G on one of the 2 SIM cards, even if both the SIM cards, for example, were within my brands, I would see 1 number of 4G customer reduced.

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Sanjay Chawla, JM Financial Institutional Securities Limited, Research Division - Research Director [58]

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All right. So is that -- sorry, sorry.

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Balesh Sharma, Vodafone Idea Limited - CEO [59]

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It's linked to therefore the INR 35 related churn. So the account you're losing is the account of a low end.

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Operator [60]

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The next question is from the line of Varun Ahuja from Credit Suisse.

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Varun Ahuja, Crédit Suisse AG, Research Division - Associate [61]

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Two questions from me. Can you share the content cost, how it has trended over the last 2, 3 quarters, the pro forma on both the companies on a joint basis? And lastly, one for you, Balesh. What do you think is the rightful market share that you would strive for once the integration is achieved, and how will you like to measure that whether it's in revenue or in subscriber given that now it's more like an active subscriber base, previously when it's more a revenue focus. So just wanted to understand your thought, how would you think is the right market for Vodafone Idea once they have a network which is integrated fully.

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Balesh Sharma, Vodafone Idea Limited - CEO [62]

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Yes, let me take the second part of the question first, so that Akshay can get in the numbers in place. I have said this before, Varun, for us as a new company, if there is a line we draw in sand, it's about being able to give customer experience especially in our higher priority markets. So rather than saying this is my target to go to customer market share which I see as a derivative or a resultant, I'm going into saying I will ensure with 95%-plus coverage in those markets and capacity as required that our experience in those markets will be at least as good or better than anybody else. Since these are markets of my strength and higher market share in terms of overall subscriber base 2G, 3G and 4G, but I have disproportionately lesser 4G even in these markets, I will stand to gain as those 2G and 3G customers now will be able to stay on with my current 2 brands rather than leaving us to go to another one because we did not have 4G coverage or capacity. So the war we are fighting is about integrating very rapidly, creating coverage and capacity across markets but specifically so also in the quad A and quad which amount to 90% of our revenues and therefore the customers there would stay on. Give you a flavor, nationally, our data market share today is below 20% somewhere, depending on the third party apps that publish those results. And if you look at my customer market share in such markets or nationally, it's much higher in the higher 30s. Even in these markets of my strength, therefore the customer market share will probably even higher, so 40-plus, but my data market share would probably be still in early 20s somewhere in these markets. So there's a clear delta of 20%. If I can get that right, which means if I can get these customers as they move in from non-data to data usage in those markets of my strength and give them no reason to leave us, while they graduate from non-usage to usage of data and from usage of data to unlimited usage of data, then my revenues will follow. And since majority of my revenues are residing in these markets, that should lead to stabilization and growth of revenue market share rather than loss. But if I look at how I'm targeting and how the whole team is focused on, it's not on a particular number on CMS or RMS, but on a particular goal to reach on each geographies as per the quarter strategy that we've made in terms of coverage, capacity and therefore, experience. Over to Akshay.

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Akshaya Moondra, Vodafone Idea Limited - CFO [63]

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Varun, on to your question of content cost, we will not be able to give you specific figures. But what I can confirm is that between Q4 and Q1, our content cost has remained more or less consistent. There's no change in the content cost.

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Operator [64]

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The next question is from the line of Sanjesh Jain from ICICI Securities.

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Sanjesh Jain, ICICI Securities Limited, Research Division - Research Analyst [65]

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One small bookkeeping question. On the GST receivable from the government, which ministry keep talking at and we keep hearing for the industry is around INR 300 billion, what is that for us?

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Akshaya Moondra, Vodafone Idea Limited - CFO [66]

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So Sanjesh, I will not be able to give you the exact figure right now. But let's say, it is a significant figure and largely whatever CapEx is been incurred on that, whatever GST is being incurred, that is largely getting stuck up today. And so...

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Sanjesh Jain, ICICI Securities Limited, Research Division - Research Analyst [67]

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So would that be more than like INR 50 billion, INR 70 billion, just a ballpark number.

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Akshaya Moondra, Vodafone Idea Limited - CFO [68]

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I mean, I'll not be able to give you a figure right now. But I can only say that the figure between industry players could be quite disproportionately distributed as the only figure...

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Balesh Sharma, Vodafone Idea Limited - CEO [69]

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Depending on who spent CapEx in which part.

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Operator [70]

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Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to Mr. Balesh Sharma for closing comments.

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Balesh Sharma, Vodafone Idea Limited - CEO [71]

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Thank you, Margaret. Thank you, everybody, for joining the call, but 2 more minutes to again summarize everything that we have presented in this call. We, as management team, are very confident that we are on the right strategy. We are tracking very well on all pillars of that strategy. Fundamentally on integration -- rapid integration, getting the synergies upfront. We are looking at geographical prioritization. We're looking at being able to do further than the synergies already in account. We see encouraging green shoots in area that are integrated versus non-integrated. As we go to our areas of strength with our integration, which happens between now and June '20, we stand to gain a lot more because those are areas where we're already stronger and we are being able to see this difference between integration -- integrated versus nonintegrated, while we've not reached our areas of strength. It will be a different case when we get to areas of our strength for sure. Our financial results and commercial results so far have not reflected the benefits directly of our integration, et cetera, but are clearly visible in the fact that the capacities have gone up, therefore the experience has gone up. Already third-party apps are showing us as #1 or #2 in 14 markets, #1 on Ookla in 3 markets and these are all going to reflect an improvement of perception over a period of time and therefore, extraction. Thank you.

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Operator [72]

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Thank you. On behalf of Vodafone Idea Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.