India’s Vodafone Idea is giving all employees an extra month’s salary on a condition that they remain on the company’s rolls till March 31, 2021. The move is aimed at stopping the employee attrition at a time when the struggling telco is trying to sustain in the market amid financial losses and lack of funding.
The telecom operator’s problems increased after a series of top-level exits in the last two months.
In October this year, it lost its chief technology officer, Vishant Vora, who has now joined Mavenir as President, Global Customer Operations and Managed Services. His exit was followed by chief legal officer head Kumar Das, chief technology security officer (CTSO) Amit Pradhan and chief digital and brand officer Kavita Nair.
Analysts said that loss of key executives could impact customer services quality, leading to more potential subscriber and revenue losses.
“…people resources were the telco’s most critical assets in these demanding times when it is trying to stabilise operations, arrest customer losses and grow the 4G business,” a top Vodafone Idea executive was quoted as saying by the Economic Times. He said that the extra month’s pay is being given as a one-time ex-gratia payout with the November 2020 salary.
Vodafone Idea had 11,705 permanent employees before March 2020. However, the telco’s exercise to consolidate 22 telecom circles in 10 clusters in May resulted in the exit of 1500 employees across functions.
As per Bharti Airtel’s recent filings, it had 15,518 employees at the end of September quarter. Reliance Jio, on the other hand, has 15,000-20,000 employees on its payrolls, as per various media reports.
The report said that Vodafone Idea has also filled the position of chief marketing officer (CMO), which was vacant for over two years with the appointment of Avneesh Khosla, who has been serving the telco as director of marketing function.
Nair’s exit from the company comes as a surprise as she was spearheading the telco’s rebranding exercise across the country. The telco recently rebranded to Vi and is focusing on transforming its business to arrest subscriber loss on its network.
Vodafone Idea, which was India’s top telco after the merger between Vodafone and Idea Cellular, has lost 155 million subscribers in the last nine quarters. Fitch Ratings recently said that the struggling telco could lose 50-70 million more subscribers in the next 12 months due to its inability to quickly expand and modernise its 4G network in the country.
Fitch had said that Mukesh Ambani-led Reliance Jio could gain more than half of Vodafone Idea’s subscriber losses, with the balance could go to Sunil Mittal-led Bharti Airtel.
The loss-making telecom operator needs to clear $6.8 billion in adjusted gross revenue (AGR) dues over the next ten years.
Vodafone Idea is currently in talks with a consortium of investors, including Oaktree Capital Management and Varde Partners to raise at least $2 billion to pay the next AGR installment and towards the network expansion. Its board had approved fundraising up to $3.4 in September.
Fitch Ratings said that Vodafone Idea’s plan to raise about $3.4 billion through a mix of equity and debt is unlikely to restore its competitive position and reverse subscriber losses, as the amount would be insufficient for capex.
In the September quarter, Vodafone Idea lost 8 million customers, while its revenue market share (RMS) fell by 22 basis points (bps) sequentially to a modest 22.6%.
The struggling telco is currently mulling over increasing prices for data and voice services, having raised prices of a couple of high-value postpaid plans in a limited manner to test the waters.
Credit Suisse said that the price hike for just two postpaid plans looks more like a signalling mechanism for a broader tariff hike.
As per reports, Vodafone Idea may hike tariffs by up to 15-20% by the end of the year or early next year. As per estimates, a 20% tariff hike could drive up the telco’s average revenue per user (ARPU) to Rs 140($1.90) in FY22E.
A similar tariff hike could increase Airtel and Jio’s ARPU to Rs 178 ($2.41) and Rs 167 ($2.26), respectively.
“VIL has been keen to raise tariffs and has already expressed willingness to take the lead on raising tariffs, given its precarious cash flow situation. Further, the company is in the middle of the fundraise (debt and equity) and a tariff hike could help generate interest from investors. In our view, this is an attempt by VIL to test the waters for the next round of tariff hikes across the board,” Credit Suisse said in a report.