Vodafone Idea Ltd
NSE:IDEA
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Good afternoon, ladies and gentlemen. This is Janice, the moderator for your conference call. Welcome to the Vodafone Idea Limited conference. [Operator Instructions] We have with us today Ravinder Takkar, Managing Director and Chief Executive Officer of Vodafone Idea Limited; and Mr. Akshaya Moondra, CFO of Vodafone Idea Limited. I want to thank the management team on behalf of all the participants for taking their 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 discussion on today's call may include certain forward-looking statements and must be viewed, therefore, in conjunction with the risks that the company faces. With this, I would now like to hand the conference over to Mr. Ravinder Takkar. Thank you, and over to you, sir.
Thank you, Janice. On behalf of Vodafone Idea, I welcome all participants to this earning call. Yesterday, our Board of Directors adopted the unaudited results for the quarter ended June 30, 2020. The detailed press release, quarterly report and unaudited financials have been uploaded on our website and I hope you had a chance to go through the same.Today, I will talk about the various strategic initiatives, along with operational highlights from the quarter. And then I will hand over to Akshaya to share details of the company's financial performance. But before that, let me talk about the unprecedented challenge we are facing today in the form of COVID-19. The outbreak of COVID-19 pandemic and the subsequent nationwide lockdown has not only impacted overall economic activity, but also impacted physical, social and mental well-being. I wish you and your loved ones are staying safe, strong and healthy through this turmoil. Vodafone Idea has played a critical role providing connectivity services to millions of Indians through these challenging times. The company's mobility services form the backbone to the digital infrastructure of the country as both professional and social interactions shifted to -- from the physical world to the virtual world. With immense pride, I can tell you that our teams worked tirelessly and did a great job of not only providing uninterrupted services to both our retail and enterprise customers and also maintained exceptional quality of service. As a socially responsible corporate, we have also provided free validity extensions and free talk time in yearly 100 million of our customers, those who were the most severely affected. We will continue to extend our support to the country to tackle this crisis. However, as most of the stores selling our recharge vouchers were closed, our customer additions and availability of recharges were impacted. Now moving on to the strategic highlights. Our most important and challenging strategic undertaking was the rapid acceleration of integration. You all have been the witness to this landmark exercise of ours and it takes me a lot of pride to highlight that integration of Vodafone India and Idea Cellular is almost complete and Vodafone Idea has fully realized its targeted annual OpEx synergies of INR 84 billion as of Q4 FY '20, much earlier from than the time line stated on the merger announcement in March 2017. We have thus consolidated at a record pace in comparison to any global merger, especially given the size, scale and complexity of this integration.Our 5 pillar strategy which acted as a compass to navigate the critical phase of integration continues to guide us going forward. As natural progression or evolution of our strategy, the major initiatives for VIL now are: number one, focused network investment in 16 B circles for superior customer experience; number two, market initiatives to drive ARPU improvement; number three, focus on business/enterprise services; number four, drive partnerships and digital revenue streams; and number five, cost optimization to drive organizational efficiency. We believe all these initiatives will improve overall customer experience and, in turn, drive better 4G additions and consequently improve revenue, profitability, cash flows and our competitive position in the market.So let me start with the top. The first and the most important initiative going forward is focused network investments to drive superior customer experience. Since the day of merger, we had a focused approach in investments towards our profitable areas. We utilized our CapEx effectively while ensuring that we offer a superior customer experience in these areas. The integration, along with network investment initiatives such as factor consolidation and refarming, deployment of TDD sites, small cells and Massive MIMOs have delivered a significant capacity uplift. Our overall capacity has more than doubled since merger. With aggressive albeit focused rollout, our 4G coverage now is nearly 1 billion Indians. Going forward, we will continue to drive incremental investments in our priority areas. Our networks will be focused on expanding 4G coverage and capacity in our 16 priority circles to further strengthen our position in these markets. These 16 circles contribute around 94% of VIL revenues and around 87% of the industry revenue. While most of our incremental CapEx will be directed towards these 16 circles, we will continue to invest in profitable districts of the remaining 6 circles and we remain competitive to ensuring seamless connectivity in these 6 circles as well. Now a moment to talk a bit [Technical Difficulty] dive on our network investments. Our overall broadband site count now stands at over 446,000, an increase of over more than 80,000 sites.
Sir, I'm so sorry to interrupt. Sir, your audio is not very clear at times. Allow me a minute, while I connect you on the alternate number.
Okay. Thank you.
[Operator Instructions] Ladies and gentlemen, thank you for patiently holding the line. We have the Chairperson reconnected to the call. Over to you, sir.
Thank you very much, Janice. So I was talking about a deeper dive into our network investments. Our overall broadband site count now stands at over 446,000, an increase of more than 80,000 sites since September 2018. While there is an increase in overall broadband sites, the increase in unique broadband locations is relatively low as we are adding 4G sites primarily on the location where there are already 3G sites. Our unique 4G site location, on the other hand, has seen a strong growth of over 22,000 sites since the merger, and we continue to drive 4G expansion. We have also added more than 11,600 Small Cells to date to improve our coverage as well as capacity in dense urban areas. Till date, we have deployed nearly 60,000 4G TDD sites to augment our 4G capacity and most of the deployed capacity is in our priority areas. We have been aggressively deploying Massive MIMO and till date, we have deployed over 12,100 Massive MIMOs, which remains the largest in India. As most of the rollout has been fairly recent, we have been deploying an array of 5G concepts and technologies like Massive MIMO, DSR, open RAN, cloudification of core and many more, while rolling out our 4G network. Currently, we have the largest edge cloud deployment in the country. All this prepares us better towards a better transition to 5G in the coming years. This quarter, our CapEx was impacted due to the nationwide lockdown; however, we added approximately 13,000 FDD sites in Q1, primarily through software upgrades on our SRAN towers. As we move forward, based on customer usage trends, we will continue to reform our 2G, 3G spectrum towards 4G. As mentioned earlier, all these investments have provided us a significant capacity uplift. Such large capacity expansion has reduced the utilization levels and improved our overall download speeds, in turn, leading to superior customer experience. Since lockdown, we have seen a strong surge in data consumption, and our capacity expansion has enabled us to service this demand seamlessly. Impact of all these activities is clearly visible, as we have been moving up in the league tables on 4G download speeds based on various reports available in public domain. As certified by Ookla, based on 4G download speeds in Q1 FY '21, we offer fastest 4G download speeds across Delhi, Mumbai, West Bengal, UP, MP and Assam. Further based on third-party data, we are now ranked #1 or #2 for at least one of the brands in all 21 circles on 4G download speeds for the month of June. Based on several other reports available in public domain, VIL is now leading on several metrics, such as video and voice experience as well as 4G download speeds. All these reports stand testimony to our continued focus towards improving customer experience. Now on to our second area of focus, which is market initiatives to drive ARPU improvement. As everyone here is well aware, telecom industry has suffered tremendously on account of below-cost pricing with heavily discounted unlimited voice and data plans. This is despite the fact that market has consolidated to an optimal structure of 3 private players and 1 government operator. While the tariff hike in December 2019 was a step in the right direction, ARPUs are still far from being sustainable. We believe the market will be able to absorb further tariff hikes, which are essential to address the structural issues faced by the sector and enable operators to generate reasonable returns on their investments. While tariff hike remains critical to improve the overall industry health, we have also undertaken several market initiatives to improve ARPU such as driving our 4G and unlimited plan penetrations. We have also launched RedX plan to attract high ARPU postpaid customers offering differentiated services with several industry-first features, including higher speed, lounge access, free international roaming packs, along with premium content. We have seen strong traction on these plans. As a part of our customer excellence drive, we are transforming customer servicing across all touch points with a clear focus towards a shift to digital. Our digital servicing capability to resolve customer queries has improved significantly, reducing customer sector loads and driving cost savings. While our mobile apps and websites are capable of addressing most of the customer queries, we have launched chatbots a few months ago, which are embedded in our apps and websites. We have also recently launched WhatsApp bot, an industry first, addressing millions of customer queries digitally. We have several new initiatives in the pipeline, such as automated tools across e-mail and phone services to digitize our customer servicing. Further, Vodafone Idea has renewed its focus on digitalization of distribution channel to completely automate sales process, creating seamless and efficient journey for our channel partners. We have also rolled out postpaid digital acquisition in several cities, including door-to-door delivery and digital KYC processes, which we gradually plan to expand to other cities as well to our prepaid portfolio. Now the third major focus area is enterprise services and new fast-growing sectors. Enterprise services remain one of our focus areas. We are well positioned in enterprise offerings across the industry vertical and will strive to further improve our position with focus on fast-growing segments of IoT solutions, cloud offering and carrier services. The strong relationship with customers over several years and global know-how of Vodafone Group provide a strong platform for future growth in this segment. We continue to maintain a clear leadership in IoT offerings, which is an emerging segment and has some exciting use cases such as connected cars, farms, smart meters and several others. We believe IoT has potential to grow multifold in the near future amid government's push towards digital India and smart cities, and VIL with its differentiated end-to-end solutions is well positioned to benefit from this trend. During the current pandemic, we continued to support enterprises and SMEs in their digital transformation journey. Our robust business continuity plan and suite of products and services are enabling enterprises to adopt digital in a secure manner, fostering remote working, while ensuring workforce safety and promote employee collaboration. The comprehensive carrier services offering powered the digital infrastructure of some of the largest OTT service providers in the country. We thus believe in a post-COVID world, which would be more digitally connected, our enterprise business offerings are very well placed to thrive. The next strategic initiative, which is driving partnerships and digital services revenue streams. On content, our strategy remains unchanged since merger. We will continue partnerships with the best-in-class rather than owning the value chain. We have tied up with several content creators and OTT apps like Amazon Prime, Netflix, SonyLIV, Zee5, Sun NXT, Shemaroo, Discovery and several others, and this list continues to grow longer by the day. Our content portfolio is thus compatible with our competitors -- comparable with our competitors. Our strategy on partnerships extends way beyond content. We have partnered with various e-commerce platforms, handset manufacturers, financial institutions, NBFCs, among many others to create value not only for customers but also for the company and its partners. Going forward, the company is also looking to expand breadth and depth of new and existing partnerships with renewed vigor, supporting further engagement and monetization opportunities. And lastly, we have initiated a cost-optimization exercise to drive organizational efficiency. Over the last few years, industry has been going through structural changes with focus shifting towards digital and decision-making increasingly becoming more centralized. Post successful realization of INR 84 billion targeted synergies through the deduplication exercise, we have initiated a further cost-optimization plan across the company in line with the evolving industry structure and business model. Through this exercise, we target to achieve INR 40 billion of annualized OpEx saving over the next 18 months. As a step in that direction, we are in the process of organization-wide restructuring to adapt to new market realities. We have shifted from circle to cluster approach, realigning teams from 22 circles to 10 clusters. Some of the other major initiatives include central design, planning and major network functions, center of excellence for customer services, focus on digital across functions and all processes. We believe all these initiatives will not only make us cost competitive, but also transform the company into a lean and agile fit for future workplace. Now moving on to the operational highlights for the quarter. As stated earlier, this was a challenging quarter with revenue decline of 9.3% quarter-on-quarter. Due to the nationwide lockdown with customers' ability to recharge, availability of physical recharge, acquisition of new customers as well as physical network rollout impacted during this quarter. Subscriber churn is now at an all-time low of 2% as net disconnections were lower this quarter; however, gross additions were impacted by closure of retail stores during this lockdown resulting in subscriber base decline to 279.8 million in Q1 FY '21 from 291.1 million last quarter. Our 4G base saw only a marginal decline and now stands at 104.6 million. Data volumes witnessed a strong growth of 10.6% quarter-on-quarter as content consumption surged in the lockdown. Our capacity expansion enabled us to comfortably handle peak volumes of 55 petabytes per day during the early days of lockdown. Data usage per sub in India remains among the highest in the world. And for now, VIL stands at 13 gigabytes per month. Now an update on the Indus day. The long stop date has now been moved to August 31, 2020. We have the option to monetize our 11.15% stake as and when the merger concludes. A quick update on other regulatory matters. On the AGR matter this quarter, we have recognized additional liability in line with the Supreme Court order basis DoT's preliminary assessment. As the matter is currently sub judice we will refrain from commenting on this matter, and we will not be able to respond to any questions on the same. Meanwhile, we continue to actively engage with the Government seeking a comprehensive relief package for the industry, which has faced many critical challenges. To conclude, while this has been a difficult quarter due to COVID-19 crisis, we have turned the new leaf and we strive towards our strategic objectives with new vigor. Post completion of integration, we have taken several new initiatives, all of which with a clear intent to improve customer experience. We believe this will help in improving our revenue, profitability and our overall competitive position in the market. With that, I hand over to Akshaya, who will share the financial highlights for the quarter.
Thanks very much, Ravinder. A very good afternoon to participants from India and a good morning or evening as applicable to overseas participants. As mentioned by Ravinder, this quarter was impacted by the nationwide lockdown as availability of recharges and new subscriber acquisition were disrupted due to closure of stores, while slowdown of economic activities impacted ability of customers to recharge. Resultantly, revenue declined by 9.3% for the quarter INR 106.6 billion as against INR 117.5 billion in Q4 FY '20. Adjusted for Ind AS 116 impact, EBITDA for the quarter was INR 18.3 billion as compared to an EBITDA of INR 21.1 billion in the last quarter. After adjusting for one-offs of INR 3 billion in this quarter and INR 4 billion in the last quarter, the underlying EBITDA has declined by INR 1.8 billion quarter-on-quarter. This EBITDA decline of INR 1.8 billion was primarily on account of lower revenue of INR 11 billion, which was largely offset by a reduction in subscriber acquisition costs due to lower gross additions, marketing costs, network costs and other optimization initiatives across all cost items. The one-off of INR 3 billion in this quarter includes about INR 1 billion relating to license fee and spectrum user charges and balance INR 2 billion is largely related to network and IT costs. The nationwide lockdown also disrupted the equipment supply and logistics, impacting our network rollout this quarter. Thus, the Q1 FY '21 CapEx spend was subdued at INR 6 billion versus Q4 FY '20 CapEx of INR 18.2 billion. However, we still added 13,000 4G sites largely through spectrum refarming. During the quarter, we have received INR 15.3 billion as part payment from Vodafone Group towards the AGR dues under a mechanism as per the implementation agreement dated March 20, 2017. We have also received dividend of INR 1.1 billion from Indus during the quarter. Net debt stands at INR 1,155 billion as against INR 1,125 billion in March '20. The cash and cash equivalents balance as of June '20, excluding the margin deposits is INR 34.5 billion. Pursuant to the judgment on AGR by Honorable Supreme Court on October 24, 2019, we had accounted for the estimated liability of INR 460 billion as on March 31, 2020. On July 20, 2020, while its order on the modification applications filed by the TSPs and the DoT, the Honorable Supreme Court confirmed the preliminary assessed dues submitted by the DoT as the final amount. For VIL, these dues as per preliminary assessment by DoT for the period up to 2016, '17, stand at INR 582.5 billion. Consequent to the above, during this quarter, we have recognized an additional charge -- I'm sorry, there was another incoming call. I'll continue. Consequent to the above, during this quarter, we have recognized an additional charge of INR 194.4 billion as an exceptional item towards the total estimated AGR liabilities. We have made a further payment of INR 10 billion on July 17, 2020, towards AGR dues in addition to payment of INR 68.5 billion made till June 2020. With this, I hand over the call back to Janice and open the floor for questions.
[Operator Instructions] We take the first question from the line of Kunal Vora from BNP Paribas.
First one on revenue. Can you help us understand the 9% revenue decline better? What will be the large contributors? If you can help us quantify the impact of international roaming, and through the subscribers not able to recharge with lower sales due to lower gross additions, et cetera? That's first question. Second one on assuming that the Supreme Court allows deferred payment, can you share your thoughts on your lead performance and fundraising and asset monetization plans? And whether you had any interaction recently with the promoters and the way forward for the company?
Okay. Kunal, thank you very much. I will start off with the first question regarding revenue decline that you talked about. So as I mentioned in my opening comments as well, this has essentially been an unprecedented time, as you can imagine. A complete national lockdown of retail. And essentially, that has resulted in not only people getting impacted, people are used to going to their neighborhood stores, recharging and suddenly those stores are closed and recharging is not available. So that lockdown certainly impacted. And primarily, you can even think about in the ways that if a person delays their recharge for a few days, that, of course, has an impact because that revenue gets lost no matter what. So I think those type of challenges have certainly existed during this period of time. Although a fair amount of volume shifted to digital as well but certainly, this thing was not helpful. Then also with the migrant crisis that took place in this quarter as well, a large number of people displaced and moving around, and that also resulted in, certainly, some revenue decline that took place as a result of that. On -- and at the same time, as I mentioned earlier, we had given free recharges to a very large base of the customers to help them, which was the right thing to do, and I think it was very, very helpful and appreciated by a large set of customers. In some cases, those also reduced their, I guess, need somehow to add recharges, which was very helpful and appreciated by them as well. And then, of course, so this was regarding the recharges amount. Gross additions, as I mentioned as well earlier were impacted because, again, retail environment is closed for people to go get their KYC norms and other things. Clearly, cost additions were lower than we had expected. Having said that, I think it was very impressive that we were able to keep the churn at our best of 2%, which I think was very, very helpful. I think more importantly, what we are seeing is that also -- by the way, just to also add, I think many of the businesses, which were shut down as well put some of their SIM cards in what we call safe custody, which is to say, look, I'd like to put this in safe custody, when my business opens up and our employees come back, I will potentially look at restarting them again. And also at times due to economic challenges, we also saw families save money, so if you had a family with multiple connections, maybe they were all sitting at home, and they said, maybe we don't recharge for one of the family members this month or for this week or this duration of time, just to also save money. So I think all of those things led a little bit to that. Also, you mentioned the international roaming. Of course, there is both inbound and outbound roaming that is impacted as a result of that, in the sense that this is generally a period where there is a fair amount of international roaming, people do travel overseas. And of course, they also have -- we have incoming roaming as well. So those were generally the reasons why this revenue decline took place. Now what we are seeing is that as the lockdown opens up, and as you know, it's -- while there's no national lockdown, it is opening up at a local and a regional level. While in many circles, this continues to still be a challenge. There are cities like Mumbai and Chennai and so on, Pune, et cetera, which are still hotspots, and there's a fair amount of restrictions there. But we are following, making sure that all the health and safety guidelines and safety of employees and our customers have kept in mind, but we are opening up. We're starting to see an improvement in that area. Also, at the same time, digitalization and digital recharges have really picked up. And so we expect that Q2 to improve. But at the same time, we expect it to improve at a gradual level as opposed to jumping straight to where it was before this lockdown happened in a way. So that was the first question. Maybe, Akshaya, you want to take on the second one?
Yes, I will. So I think, Kunal, your question is, secondly, on what happens in terms of long-term planning once the AGR judgment is in place. And I think basically, if I may explain that we are, of course, awaiting the AGR judgment and what is the final decision on the period of repayment. And I think that will enable us to assist in what then exactly are our funding requirements going forward. Over a period of time, I think, as we have mentioned earlier, most of our integration activity, which was the first stage of our investment is also coming to a close. So that activity is coming to a close. So both with respect to the AGR judgment, we will get clarity on what is our funding requirements for servicing all these things. Also, additionally, what are our additional investment requirements going forward. And based on that, we will take suitable actions for getting the company and the business adequately funded. But I think we can discuss more details on that only once we have clarity on the AGR matter in terms of the final period of repayment.
Okay. Just to follow up on the first question. The trends have been very divergent like this time and also in the recent past across operators. And also, this time, you think you have lost about 1.5 million postpaid customers. So if you can comment on that as well.
Yes, Kunal. So on the -- yes, the trends have been divergent. And I think we believe there is reasonable explanation for those things. Certainly, if you look at Bharti, as we have stated before, they have benefited from investing ahead of the cycle on 4G compared to us. We are catching up. We have done our integration now, where some of their investments were earlier, which I think has led to some advantage. Also, because of this early investment, their customer mix in regards to their UL base and 4G base tends to be different and as a result, to some extent, is less susceptible to downgrades. That's some of the ones that we saw, which I think is also a reason to explain. And then also, I think it's important to remember that the gross additions. Again, maybe our channel is a bit more dependent on physical, let's say, top-ups than maybe some of theirs. So we -- I think we saw a little bit of impact of that as well. But given what we have talked about in terms of our quality of our network and the fact that we have completed our integration, this, I think, puts us in a very good position to now going forward talk more specifically about our capabilities and let the capabilities of our network and the quality of our customer experience talk about our capabilities and hopefully lead to better customer additions not only on 4G and UL going forward, but also better customer experience. So we expect that this trend will now continue to change because clearly, some of the reasons that I talked about earlier have led to divergence, which got further exaggerated, I think, in this lockdown period. But as the country opens back up and with the completion of our network integration as well as our IT integration -- by the way, there's a huge amount of work that has happened actually during the lockdown period where IT integration was completed. And that, of course, makes a big difference also on customer experiences and processes, and we expect that to now start to kick in.
And any comment on postpaid? Why is there a sharp decline, despite an improvement in...
Yes. So I think the postpaid decline partly is that on the -- what we saw -- because of the businesses being shut down, we saw actually what I mentioned earlier, safe custody of many of the M2M connections, machine-to-machine connections. So if you can imagine because the retail environments were closed down, the SIMs that go into the point-of-sale type of equipment, and we have a very large market share there. As I said, many of the businesses said, please put that in safe custody, refill them when business opens up and so on. So we saw actually a drop as a result of some of those activities that took place, especially around business, where people decided that they wanted to put these SIMs under safe custody because their employees are not working rather than actually, let's say -- so that's why we saw those numbers generally higher than what they normally are. We expect that as business activity picks up, that these, hopefully, connections will come back because we have put them in safe custody.
We take the next question from the line of [ Ashwin Agarwal ] from [indiscernible].
My first question is, at what ARPU level do you think the business will be profitable and self-sustaining?
So look, I think I will talk specifically about a little bit the need for ARPUs to go up. And then maybe Akshaya, if appropriate, you can add later towards it. As we mentioned before, the ARPUs are very, very unreasonably suppressed in India. They are well below the cost structure of all players. And this is an area that needs to certainly improve. We've been talking about it for a long while now, but the industry structure is at the optimal place. I think there is an opportunity for the entire industry. And certainly, it is something that has been well recognized not only by COAI, but also by the government. And as you know, that right before the lockdown, TRAI undertook a floor pricing consultation, which is still under process, and we are hopefully looking forward to a good outcome of that as well. And the premise of that was essentially that the pricing needs to go up and in reality all players are selling below cost structure right now. We believe that while this floor pricing and the Government intervention could help in this way, but I think it is also important that the industry starts to move in the right direction and actually start to take prices up in any case. As you know, we took the first initiative in December of 2019 to take a price increase, and our competitors also followed suit accordingly. While we wait for the floor pricing consultation, I think there are opportunities to increase prices at all as well and we expect that to rise over the coming period. And then I think this is a sentiment that has been expressed universally in the industry and even including the Cellular Operators Association, that this is the right thing to do. Akshaya, maybe you want to talk about what is the right price points.
Yes. So actually, see ARPU is a matter of what service is being offered. So it is a bit of an evolving thing, and there is a change. But if I weigh -- I can just give you a rough indication that if you look at the kind of traffic and the kind of offerings that we have today, I would say that for the business and generally industry as a whole to recover its cost of capital adequately and make some surplus over that, price of -- on an ARPU level of about INR 230 to INR 250 is a level which would kind of give you a reasonable working cost of capital recovery. And if I put it in perspective, I think before we saw this decline in pricing over the last 3, 4 years, we were at levels of INR 200 of ARPU. And if you look at the data usage per subscriber, it has gone multifold. So it is -- given the cost competitiveness of Indian industry, actually, it's good thing that even at INR 230 to INR 250 level of ARPU, the industry can actually generate a decent return on capital. Does that answer your question?
Yes.
Next question is from the line of [ Abhiram Iyer ] from [indiscernible].
My question is twofold. One, on just continuing the ARPU discussion. Could you please highlight why there was a decline in the ARPU despite a price increase in December? Ideally, that should have still flowed through. The other question that I had was on, if we ignore the AGR ruling and the timing of the AGR cash flows required, what is your liquidity situation like? What's the kind of short-term debts that need to be paid over the coming -- over the rest of the financial year? And how are you maintaining that liquidity situation?
Thank you, [ Abhiram. ] I will take the first question, and then I'll ask Akshaya to answer the second one for you. So yes, [ Abhiram, ] as I mentioned earlier, predominantly, we believe that the ARPU declines were related to inability of customers to recharge because of the lockdown that took place. And as I said, if there's delays in even recharging, even if they eventually do recharge, the delays in recharging leads to revenue loss, which at the end, leads to ARPU reduction. We also believe that there were -- there are economic challenges and people, especially migrant workers and other people were making decisions on, "If I'm in lockdown, do I need to recharge both" or multiple family members and people were making choices there as well which I think it also led to ARPU decline. And at the same time, I think if you look at the validity extension that we gave, I mean, that also had a somewhat an impact on the ARPU, which I think, again, is a very important and the right thing for us to do. I think the important part to remember is that also because gross additions were lower, which generally tend to be also helping in the revenue side of things. I think the fact that we should take, to some extent, satisfaction from the fact that we have kept churn at the lowest level, 2%, which is the lowest level that we've had in a very, very long time, which is a strong testament to not only the experience that the customers were enjoying during this lockdown when they were using all this extra data and voice and so on, which has been very, very good and the ability for us to provide that service during this period of time. And at the same time, I think as the lockdown opens up and the channels come back as well as recharging come back and the economic activity picks up, we expect this to go back up slowly, and we are already seeing some of that in July and so on. And at the same time, I think the other important part is that the quality of our network, which people get to experience now and the integration being completed, I think, are also very strong testaments. When you have a best network in as many circles that we talked about, and #1 or #2 in all 21 circles, I think that gives us the credibility that as and more we talk about our network and our capabilities and the digitalization that we've done, we believe that this will also provide us and move us in the right direction. Akshaya, over to you.
Yes. So on the question of, I think, the debt servicing, which you asked, so actually, as of 30th June, if I look at, we had debt servicing until March '21, which is rest of the financial year of about INR 36.6 billion, but a large chunk of that was due in July, which has been paid. So if I take away the INR 29.4 billion of debt, which has already been paid in the month of July, what remains to be paid from August to March '21 is only INR 7.2 billion. So our lumpy debt servicing is kind of behind us, and over the rest of the financial year, there's very little debt servicing to be done.
We will take the next question from the line of Rakesh Jhunjhunwala from Rare Enterprises.
Sir, my question is that your average ARPU for the quarter is INR 114. So what is your ARPU for June?
I don't think we disclosed that. Akshaya?
No, but then it is -- you will not disclose in normal circumstances. But these are extraordinary circumstances where in April, you had abnormally low ARPU. So if you tell us this June ARPU, it will get a -- it will give everybody an idea of what the actual revenue is after the recovery?
Okay. I can only say that we generally do not share this detail, but the ARPU during the quarter may not have changed very much.
We take the next question from the line of Varun Ahuja from Crédit Suisse.
I've got quite a few questions. Ravinder, if you talk about, I think the problem starts from the top where your subscriber addition continues -- subscriber loss rather continues. So can you give us some color since the economy has opened up, has that subscriber loss stopped? And what are your plans to kind of address that? Number two, again, your 2G to 4G migration is again seems to be not happening as per industry, the peers are doing and how do you want to address that? And is there any plan if one of your competitors launches -- they're talking about launching a low-end smartphone device, how can that impact your ability to retain your existing subscriber? That's the 2 questions. Number three, on the investments that needs to be made, you're talking and highlighting enterprise business as a huge opportunity. But again, you'll have to make investments in terms of fiber network and setting up some of these ports and everything. So how do you address given you need to make investment in wireless also and your condition -- what is your priority if you get some more cash, more liquidity, which assign more priority for you to kind of look at the long-term sustainability of the business? That's number three. And number four, Akshaya, if you can clarify now that you have given this provision, till when are you -- you mentioned INR 582.5 crores for fiscal '17. It looks like the total provision is around INR 650 crores or something. So have you now taken it till fiscal '19, fiscal '20? Is that -- any clarity on that will be helpful.
Okay. Thank you, Varun. I think I have talked about a few of these, but I will try to reiterate again. Look, I think the subscriber losses explanation I have -- I've tried to explain before. Frankly, bulk of our subscriber number losses are related to gross additions, which, as you know, because of the lockdown were predominantly shut down because there is no channel acquisition taking place or very little taking place, new additions, what was -- that resulted in our subscriber loss. And because the churn was at the lowest number at 2%, so with the lowest churn ever reported and, in fact, in some cases, it's better than our competitors, you realize that really the gap for us is really between our gross additions, which were impacted. We expect that as the country opens up and as the channels start to open up, which they are slowly; in some areas, there are still restrictions, but we expect that to open up. I think that part will be mitigated. I don't see a problem with that over time. And certainly, we have said that our subscriber losses, to some extent, one, have been earlier associated with the integration work that we were doing. And as we were putting our customers, in many cases, through an integration effort, clearly, there were partly some challenges on the network side, which have now been completed. And so I think we expect given the quality of our network going forward that those subscriber losses could be tempered, and we certainly expect that to be the position going forward. Again, I was fairly happy with the overall churn number that we have been able to produce. And I think in the market when we start adding gross adds, which we should be, we expect those numbers to improve. In regards to your second question about 2G to 4G migration, this is the strategy, which I also highlighted in my opening remarks, is for moving customers from 2G to 4G. Now important thing to remember is that 2G to say, because there's been talk about 2G needs to be stopped. There should be no 2G subscriber. That, I think, is a complete lead of wrong message. I think the important thing to remember is, if you look at 2G, it's very efficient. It is a low-cost service. People using feature phones who potentially cannot afford smartphones or don't need smartphones because they're either elderly or don't feel the need, I think this service provides -- this 2G service provides a very good service option in many, many cases for a certain segment of customers. Now those segment of customers should continue to be served by this technology, and there's nothing wrong with it. Even in the most developed countries in the world, almost about 15% of the customer base still continues to stay on 2G after years of 3G, 4G, and in many cases, even 5G has been launched in those countries. There's a large -- reasonably large segment that stays. Now the important part is that over time, we expect many, many more to migrate from 2G to 4G, which is the process that we will enable. This is why our investments have gone into our 4G network. This is why we have put out our CapEx there. This is why we measure the quality of our customer experience on the 4G network because now, with our integration behind us, is really an opportunity for us to talk about very, very openly and very, very clearly to our customers about the quality of our network and how and why they should be migrating towards the 4G network as their needs from it because it's not always, as I said, necessarily that everybody needs to be migrated. Then in regards to a low-end smartphone. I think the choices that we are making, the ones that we believe are working on is that, obviously, subsidizing 4G devices is not a business that we want to be in. This has never been our business, and we believe that is not the optimal way of spending money. I think the important part for us is that there is an ecosystem of OEMs that are focused on delivering the best quality experience on smartphones in the cheapest possible scenarios. Those OEMs are there. Our strategy and our plan is to work with those OEMs to deliver those handsets to the customers as they need. And along with financial providers or NBFCs, which will allow people to buy these smartphones in a manner, which will be in easy installments, EMIs, et cetera, which will then enable them to have the experience. We believe that is the right way of actually letting people choose what devices they want to be on, letting people move at their own pace and at the same time, move forward in a profitable manner rather than throwing a lot of subsidy in the market on 4G devices. This has been, as we know, tried and tested in many, many international markets and has never necessarily worked. Even many of the markets where subsidy is an important part, always wish and say that they wish they had never gotten into this game. So I think our strategy is the right one, which is to migrate them at the right pace and with -- along with a suite of OEM handsets, along with potential financing partners that we are partnering with to bring these smartphones, all on the basis of the fact that we now have a very good quality network, which we will be able to bring the customers on to because the experience, in many cases, is better than anybody else in the industry. Your next question was about investments in the enterprise business. Actually, we have made significant investments in IoT platforms, we have made significant investment in our carrier businesses and so on. When I talk about enterprise business, I'm not talking about sort of last mile fiber-to-small businesses. What I'm talking about is metro fiber rings, which allow to provide several services for digitalization and for large customers and big large OTT players, providing them with fat pipes and large businesses with fat pipes, which allow them to be able to digitalize and then build services on top of that, which I believe is the more secure and a much better opportunity that exists. So we are not -- we, of course, are making investments in fiber and connecting those businesses. But those are always evaluated on the basis of the opportunity. They're hugely related to large businesses, which are looking for fair amount of bandwidth and connectivity, but they always involve certain services that go along with them. And for each of those cases, we look at those and we make those investments, and we have been making those investments in the past, and we will continue to make those going forward. And from a prioritization perspective, they follow the same prioritization because in the end, they are also part of our overall capacity building that we do on our core and/or transmission side in any case. Hopefully, that answers those questions, and I will hand over to Akshaya for the last one.
So if I may just add on the last point, Ravinder, which you were explaining also additionally is that generally, enterprise business wherever large investments are involved, these also tend to be a specific business case related where the investment and the returns are much easier to see than opposed to a much larger wireless business. So actually, the investment decisions on many of these enterprise cases is much easier and the return is very clearly visible. So that's just an add-on to the comment on enterprise business. On the AGR liability, the figure of INR 654 billion, which we have disclosed, that is the up-to-date liability up to 30th June '20 based on the Supreme Court judgment. Until '16, '17, this has been taken on the basis of the affidavit filed by the DoT in the Supreme Court. And post that, it has been taken on our best estimate based on the Supreme Court judgment, and this includes interest up to 30th June 2020.
This is helpful. Ravinder, just a follow-up. On the first question, what I was trying to gauge is since the economy has opened up more over the last 30 days, have you been able to stop that arrest or not? Also July trend, if you can share, that will be helpful.
I mean, I can't talk specifically, Varun, as you can imagine, but I can tell you, yes, of course, as the lockdown has opened up, and it is -- let's be very clear, it is opening up in a gradual manner because there are many parts of the country that still tend to be hotspots, and we have to follow the guidelines and rightfully so. But of course, as those open up, the trend has improved.
We take the next question from the line of Vishnu K.G. from JM Financial.
Could you please elaborate on your new strategy? I mean, trending the focus of operations from 22 circles to 10 clusters. So what does it mean for the business? I mean, do we see an active pullback of CapEx from all the nonpriority people? Or is it like Vodafone Idea would continue to be in those circles, but in a limited area?
Okay. Vishnu, let me clarify for that. I think there are 2 -- those are 2 different concepts. So let me explain very clearly. One which is we have a nationwide business, which, of course, from a licensing perspective, has always been divided into 22 circles. And historically, our companies and many of the companies have continued to operate in a way where effectively we replicated the entire organization structure of how we worked in each one of those circles across the nation, across each of the circles. So it didn't matter what the size of the circle, it didn't matter the importance or the significance of the circle to a business, we effectively had the same organization structure that was replicated in each of those circles. Now as the industry has changed, consolidation has taken place, many, many of the activities that we used to do at each of the circle levels have become more centralized. So for example, if you remember many years ago, there used to be different pricing in different circles, for example. There used to be national roaming. There used to be other type of things that used to take place, specific to that circle. In fact, even radio planning, network planning used to be done at the circle level. All of those activities over time have been now centralized. So there's no reason to actually have X number of people sitting in a particular circle doing network planning. It can be all done, for example, in a centralized location where you can create a center of excellence. Similar thing lies to many of the customer service type of activities that you can do, you can centralize in those activities. So the cluster-based approach that I mentioned in my opening comments and what we are talking about is really, when we did the original merger, all we did was we deduplicated. We had 2 circle organizations. We turned into 1 circle organization. This now takes it a step forward to say, actually. Now with given all the things that have taken place that I talked about earlier, actually we need to not even have 22 circle organizations, we need to have total of 10 organizations and clusters that take care of all of these, let's say, license areas through a common organization, which is well-designed to suit the needs of that. It has nothing to do with CapEx. It has nothing to do with the importance of that circle. This is the better way and a more efficient way to run our nationwide operations. So that's one part that I wanted to be very clear, and it is something that is certainly very well understood, and we believe it's a much better way, actually, of running organizationally and bringing efficiencies together. Then your earlier topic about our CapEx investment. We have said our CapEx investment is -- predominantly, our CapEx investment goes into the top 16 circles. There are 6 circles where we are net additive. They received significantly lower amount of our CapEx prioritization. But still in those circles, we do have -- in many of the top districts, we do have a very good network. We have a good customer base. We continue to operate seamlessly, and our plan is to continue to do that part. And we are -- we will continue to prioritize our capital investment in those priority 16 circles, which is where 94% of our revenue comes and 87% of the industry revenue comes from, which is why they are the important circles in our view. I hope that clarifies the 2 things.
We take the next question from the line of Sachin Salgaonkar from Bank of America.
I have 2 questions. First question is on CapEx. Now what could be any guidance or what could be the right level in terms of how we look at the CapEx investment? And Akshaya, when I look at that investment versus the cash on your balance sheet, how should we look this CapEx would be funded? Second question, and it is about your cost control and new initiatives. So clearly, you guys are projecting in terms of looking to control costs. One of the major cost has always been the rental and the leases that you end up paying. Any thoughts in that direction? Is that -- is there room to control those costs also?
Maybe I will initially just talk a little bit about the cost control, which is your second question. And then Akshaya, maybe you can take specifically around rental leases and then, of course, the CapEx question that was asked by Sachin. So on the cost control side, Sachin, just to be clear, I briefly mentioned that earlier, when the merger took place and while we were going through the integration exercise, most of our focus was really around deduplication and removal of deduplication of costs. So as I have mentioned, if we had 2 people doing a job in a circle, we said, after the merger organization, there should be 1 person or 1.1 person depending on the job itself. But generally, those type of decisions were made. We believe now with our integration predominantly behind us, this is an opportunity for us to now actually not only change the way we work as well as the fact that many of our IT systems have been integrated and that means updated processes and digitalization of processes can imply. There is a significant opportunity for cost reduction. And that's the organization changes that we have embarked on. And many of those are already in place. Some of them are -- should be done very, very soon. And we expect to get synergy benefit out of that. So that, along with several other items that we are exploring, which is what was mentioned earlier on in my opening statement, we expect to be able to reduce further OpEx by INR 4,000 crores in the next 18 months. And this will flow directly, obviously, to the bottom line in terms of that. And this is the opportunity we believe it exists. And we feel very confident that we can find a way to do it. And actually, in a way, it will be a more efficient way of operating the business than we have been doing in the past. Over to you, Akshaya, to specifically explain the other points.
So Sachin, to answer your question specifically to the sell-side running cost or tower cost, I think, rental per se is not a subject of discussion right now, but there are some anomalies, which have crept up into the agreements in terms of how loading charges are charged and all that, where this has become a very complex MSA. So those are some of the anomalies which may get addressed as a part of the discussion, but the basic rental kind of there's no discussion. But more importantly, I think on the energy front, there is -- everybody believes that there's a lot of scope for controlling pilferage, optimizing the energy cost and that is a major focus area for us also and I think that would be true of other operators also because we share the same infrastructure at the tower company. Also, our IT integration is now completed. And now in the initial period of integration, it was not possible to bring down the IT-related costs. In fact, the IT costs were higher during this period, and IT would be another major source of getting cost improvements. So that is on the cost part. Moving on to the CapEx and the funding. So let's put it this way that when post the merger, we had kind of laid out a plan for ourselves and it was to say that we need to get the integration done and all that was planned. That plan has been largely executed. It would have come to an end. But for the lockdown, which is kind of impacted, and particularly our integration is -- major balance is less than Maharashtra and Tamil Nadu, which are both large geographies and which are the 2 states, which have been significantly impacted by the COVID. So as far as the CapEx is concerned, on the integration part, now we are coming to the end of the cycle. Now as I also mentioned in the beginning that we now need to kind of decide on our strategy for investments going forward to be competitive, at least in the focused geographies, which we have stated. There, we are just wanting for the conclusion as far as the AGR matter is concerned, which will give us clarity on what kind of funding requirements do we have for meeting those obligations plus the other existing obligations. And then we can see what is the investment, and then we are definitely looking at exploring opportunities for raising funding. But I think we can discuss more about this once we have the AGR decision finally done and we have clarity on what is our funding requirement going forward.
Well ladies and gentlemen, due to time constraint, that was the last question for today. I would now like to hand the conference over to Mr. Ravinder Takkar for his closing comments. Over to you, sir.
Thank you very much, Janice. And once again, thank you for all of you for joining. As I mentioned earlier, I think these are critical times, not only from the pandemic perspective, and I hope each one of you stay healthy and safe, but at the same time, I think this is a very important and a critical moment for our company as well as the biggest milestone that we have achieved is, we are reaching a conclusion of our integration. The quality of our network is as best as it ever has been, and it's very, very competitive, and it's the latest technology that we have built. And we believe that gives us a great opportunity now to pivot, and with our IT integration also completed, to pivot the company in the right direction, which is adding more 4G, adding more unlimited subscribers and then start growing the business and our subscriber base, which is what we are anticipating. Now also at the same time, the stress on the industry continues. I think it is going to be very, very important that further ARPU increases continue to take place. I think we have a national digital telecom policy, which is there. I think the implementation and fast implementation of that will be important, and we look forward to doing that as well. But that's the quick update. And thank you very much, and please stay safe.
Thank you. On behalf of Vodafone Idea Limited, that concludes this conference. Thank you all for joining. You may now disconnect your lines.