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, MD and CEO; and 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 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, therefore, viewed in conjunction with the risks that the company faces. With this, I now 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 earnings call. Yesterday, our Board of Directors adopted the unaudited results for the quarter ending September 30, 2020. A 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. Let me talk about the various strategic initiatives along with operational highlights for the quarter. And then I will hand over to Akshaya to share details on the company's financial performance. As the impact of COVID-19 pandemic and subsequent lockdown continues to be felt, I wish you and your loved ones are staying safe and healthy. Vodafone Idea continues to play a critical role, providing uninterrupted connectivity services to millions of Indians during these challenging times. Moving on to key highlights of the quarter. This was an eventful quarter for us. The AGR uncertainty is largely behind us as the Honorable Supreme Court allowed a payment period of 10 years to clear the AGR deals. Further, as the last leg of the integration, on 7th of September, we have launched our new brand Vi, which leverages on the legacy of 2 of the most loved brands of our country, Vodafone and Idea. With this new brand, we are now all set to regain the customer mind share, an area where we were missing from for the last couple of quarters. Further, on 4th of September, our Board has approved the fundraising to support our network investment needs. Akshaya and I will discuss these developments in our remarks and then respond to any questions you may have. Moving on to our strategy, which has acted as a compass to navigate the critical phase of integration and continues to guide us as we move forward. Our strategy is developed with the primary motive of offering superior customer experience. We believe better customer experience will help us in driving better 4G [ additions ] and consequently improve revenue, profitability, cash flows and our competitive position in the market. Let me now discuss the progress we have made on our various strategic initiatives. The first and the most important initiative is focused network investments to drive superior customer experience. As a company, our philosophy has always been to have a focused approach in our investment. Biased towards our profitable areas, to utilize our CapEx effectively while ensuring that we offer a superior customer experience in these areas. Going forward, we will drive incremental 4G investment in our 16 priority circles, which contribute 94% of our revenues and 86% of industry revenue to further strengthen our position in these markets. With target to cover 90% plus population in these key markets in addition to increase our data capacity. We also continue to invest in profitable districts of the remaining 6 circles. Now an update on our network investments. While our CapEx improved this quarter compared to the last quarter, it still remains lower than historical trends on account of COVID-19 induced disruptions. However, we added approximately 10,000 FTD sites primarily through refarming of 2G and 3G spectrum to expand our 4G capabilities and capacity. We continue to add LTE 900 sites, including through BSR. Till date, we have deployed nearly 61,300 4G TDD sites to augment our 4G capacity and most of the deployed capacity is in our priorities area. We have deployed over 12,400 massive MIMOs, which remain the largest in India and more than 11,800 small cells till date.Our overall broadband site count stood at over 457,000 and offer 4G coverage to approximately 1 billion Indians. All these investments have provided us a significant capacity uplift, improving the utilization levels despite growing data volumes over a period of time. This, in turn, has improved our overall download speeds leading to a superior customer experience. Our relentless pursuit to drive network improvement through integration and incremental network investments post merger is clearly visible to our improved rankings. As for Ookla, our GIGAnet 4G network is now fastest network in the country, which stands as testimony to our journey of becoming the superior 4G network compared to a year ago, when we have the fastest 4G speed only in 3 circles, of Delhi, MP and West Bengal. In addition to the fastest 4G network, we are also the most consistent 4G network of the country, offering 4G download and upload speeds above the minimum thresholds as defined by Ookla. These findings are consistent across other third party reports, which are also available in the public domain. Let me reiterate. We are deploying an array of 5G concepts and technologies like Massive MIMO, PSR, Open RAN, cloudification of code, et cetera, while rolling out our 4G network. We have also deployed the largest EDGE cloud deployment in the country. The second focus area is market initiatives to drive ARPU improvement. While tariff hike remains critical to improve the overall industry health, we have also undertaken several market initiatives to improve ARPU with focus on driving 4G and UL penetration. As I talked about, we have integrated our 2 strong brands in a single brand Vi, with a promise to carry the legacy of these 2 brands. We have launched a very high decibel campaign for Vi and several more are in the pipeline, which will all highlight our initiatives on superior network, improving customer experiences, et cetera. Over a period of next few days and months, there is a clear plan to create customer awareness about the new brand and its promise to the customers. These initiatives are targeted to regain the customer mind share. As stated in the previous quarter, Vodafone Idea has renewed its focus on digitization of customer services across all our touch points. As well as complete automation of distribution channel, creating seamless and efficient journey for our channel partners. All these initiatives has helped us tremendously during these challenging COVID times. We have also rolled out postpaid digital acquisition in several cities, including door-to-door delivery and digital KYC processes, which have gradually plan to expand to other cities as well as to our prepaid portfolio. The third focus area is business services and new fast-growing segments. Business services remain 1 of our focus area. 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. While we continue to focus on our existing segments, we have moved forward, cloud services is becoming central to our growth strategy via both our own assets as well as through strategic partnerships. We continue to maintain a clear leadership in IoT offering, which is an emerging segment, and have some exciting use cases such as connected cars, farms, smart meters and several others. We believe IoT has potential to grow multicore in the near future. [ Unmet ] government's push towards Digital India and smart cities, and our enterprise-grade, highly resilient IoT eSIM solution allows multiple network profiles on a single sim with the capability of remote service provisioning on a rare time basis over the air. This is opening up a whole new gamut of some very exciting use cases across the industry, such as automotive, logistics, agriculture, health care and many more. We have also expanded our security service portfolio with managed security services to enable businesses to become more secure digitally. Managed security services is built on next-generation firewall technology, giving a complete perimeter-based protection. This means customers can easily control applications, prevent intrusion and get advanced visibility across the network. During the current pandemic, we continue to support enterprises and SMEs to go digital in a secure manner through our suite of products and services. Our comprehensive carrier services offering powered the digital infrastructure of some of the largest OTT service providers in the country. In a post-COVID, digitally connected world, our enterprise business offerings are well placed to thrive. Our next strategic initiative is driving partnerships and digital revenue streams. We have several regional and global corporate partners, and we will continue partnering with the best-in-class rather than owning the value chain. Our content portfolio is comparable with our competitors, while our approach of partnership is very different compared to hybrid approach by 1 of the competitors and a [indiscernible] approach followed by another. Our strategy and partnership extends way beyond content. We have partnered with various e-commerce platforms, handset manufacturers, financial institutions and BFC, among others, to create value not only for our customers but also for the company and its partners. As we plan for future, we are now focusing on our capabilities on our platform. to offer a deeper integration to our partners for a differentiated experience and create data monetization opportunities. And lastly, on our cost optimization exercise, we have made good progress. and we target to achieve INR 40 billion of annualized OpEx savings over the next 18 months. As of Q2 FY '21, we have already achieved approximately 25% of these targeted annualized cost savings. Moving on to operational highlights for the quarter. Revenue for the quarter was INR 107.9 billion, a growth of 1.2% quarter-on-quarter as economic activities have gradually started to resume. The subscriber base declined to 271.8 million in Q2, FY '21 from 279.8 million in Q1, FY '21, a decline of 8 million. However, the gross additions improved with gradual opening of retail stores. The subscriber churn was at 2.6% as the market activity increased during the quarter with lifting up of restrictions. At the end of the quarter, the 4G subscriber base improved to 106.1 million versus 104.6 million in Q1, an addition of 1.5 million 4G customers. The data volumes declined by 4% quarter-on-quarter as data usage normalized compared to the significant higher volume witnessed during the early months of the lockdown. Now an update on Indus stake. Come 31st of August, Vodafone Idea, along with other parties have agreed to proceed with the merger completion. NCLT has also recently provided its approval. We intend to monetize our 11.15% stake, value of which is currently approximately INR 38 billion. This quarter, our Board has approved fundraising of up to INR 250 billion through a mix of debt and equity. We have also received shareholder approval for the equity base. We are progressing well on this and expect to conclude this exercise in the next couple of months. Now an update on the regulatory matters. On the AGR matter, the Supreme Court gave its final judgment of 1st of September, ending the uncertainty on payment timelines, which was a welcome relief. as VIL has already paid INR 78.5 billion, more than 10% of total deals. The first installment will be getting due on March 31, 2022. Following the judgment, we have also written to DOT to rework the preliminary demands, adjusting for computational errors and [indiscernible] pass throughs and payments made but not considered while computing the demand. 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, the quarter sequentially improved as economic activities have gradually started to resume, resultantly revenue was up by 1.2% for the quarter to INR 107.9 billion as against INR 106.6 billion in Q1, FY '21. Adjusted for Ind AS 116 impact, EBITDA is INR 19.3 billion for the quarter as compared to an EBITDA of INR 18.4 billion for the last quarter. After adjusting for one-offs, credit of INR 3 billion in this quarter as well as the last quarter, the underlying EBITDA has improved by INR 0.9 billion quarter-on-quarter. This EBITDA improvement of INR 0.9 billion was primarily on account of higher revenue of INR 1.3 billion as well as benefit of cost optimization exercise, which was partially offset by higher subscriber acquisition costs as gross additions improved with opening of business post lockdown. Q2 FY '21 CapEx spends improved to INR 10.4 billion, versus Q1 FY '21 CapEx of INR 6.0 billion. During the quarter, we have received INR 4.4 billion, in addition to INR 15.3 billion already received in last quarter, as payment from Vodafone Group towards the AGR dues under a mechanism as per the implementation agreement dated 20th March 2017. We have also received tax refund of around INR 9 billion during the quarter. Net debt stands at INR 1,145.1 billion as of September '20 as against INR 1,155 billion in June '20. The cash and cash equivalents balance as of September '20 is INR 14.3 billion. On 1st September '20, the Honorable Supreme Court confirmed the preliminary assess due submitted by the DOT as the final amount and also allowed payment to be made in annual installments until March, 2031. Accordingly, during the quarter, we continued to recognize the AGR obligations based on the judgment of the Honorable Supreme Court license agreement, et cetera. As the next installment payable by the company is due by March 31, 2022, we have reclassified the requisite amount to other noncurrent liabilities. Further interest on liability towards AGR judgment is now accounted under finance costs. With this, I hand over the call back to Janice and open the floor for questions.
[Operator Instructions] The first question is from the line of Kunal Vora from BNP Paribas.
First question, can you share your thoughts on the new postpaid plans announced by Jio? Are you seeing any impact? And do you see a need to respond? Also last quarter, you lost about 1.5 million postpaid customers, which was partly because of M2M customers and impact of lockdown. Some of them, sort of, come back this quarter, but we are not seeing that like numbers declined again. If you can just talk about postpaid?
Sure. Thank you, Kunal. Let me take that question. So on the postpaid offers by Jio. As you know that -- first of all, I think it's a well-known thing in the industry for many years that postpaid customers tend to be less price sensitive. They tend to be much more sticky as well as sensitive to the company that they kept their service from. And I think this has been an important factor for a very, very long period of time. Also, at the same time, as you know, what Jio had a postpaid plan, which was a INR 199 plan, which was significantly lower than the offers that we had and the ARPUs that we have for postpaid for a fairly long period of time. And that obviously did not gain any traction from their perspective. Now I think 1 of the things that this offer from them is a clear indication that this is really to move to a higher ARPU, which I think as an industry, we have talked about how higher ARPU is very, very important. And I think this move clearly highlights what our competitors are also trying to do, which is to improve the ARPU in the industry, and I think this is a move in the right direction by going forward. So the INR 199 plan now becomes INR 399 in which will provide an ARPU uplift. So I think this is a welcome step in the industry. Now you asked us specifically, we are seeing any impact of that? Actually, it's early days. But so far, I have to say that the response has been very little to none on our existing base in terms of their either desire to move or to some extent, even their request to understand what those offers are. And as you know, we also offer many of these services to our postpaid customers. We have not only a very large base, but also we offer many other plans. This offer is similar services to our customers. So I think that's sort of where we are on the postpaid base. Your other question regarding M2M. The M2M base had declined last quarter, predominantly due to the lockdown. As you can imagine that if the retail industry and many other industries slowed down and close down, the use of M2M sims had come down. What we are starting to see now is that with the opening up of the country slowly and the business is getting back up and opening, we've started to see that the M2M business has started to pick up. The trend is in there -- is now going in the right direction. And we expect that to continue as further opening up the country takes place and businesses get to more and more normal operations as we move forward.
Sure. Sir, second and last question on CapEx, it still remains below INR 16 billion in last 2 quarters. Is it because of earning issues and uncertainty or this level of CapEx is sufficient? And how should we look at CapEx for this year and next year?
Akshaya, do you want to take that?
Yes. Yes. So Kunal, actually, as we had, I think, probably also explained in the last quarter, of course, the Q1 was impacted somewhat by the lockdown. Now the lockdown impact has gradually gone away in this quarter. So it is -- at the end of the quarter, the CapEx level is back to business as usual. As we mentioned earlier that our initial plan was to complete the integration, which has been completed and along with that, a significant amount of capacity has been created. Our further capacity requirements are not significant. And hence, the CapEx requirement also on the capacity side is not significant. We have also stated earlier that our -- there's a strategy where we want to expand our 4G coverage from the current level. However, that initiative, we will take once the funding is tied up. So in the interim, we are largely focused on making investments, which are required in line with the growth of subscribers and growth of traffic. And to that extent, I would say that the CapEx levels would be somewhat increased from the last quarter levels because there was an impact of the lockdown continuing in early part of the quarter. However, it will not change significantly from the current levels.
The next question is from the line of Vivekanand Subbaraman from AMBIT Capital.
I have 2 questions. One pertains to the tax refund and the indemnity, the amounts that have been received from the Vodafone Group. How much of the tax refund and the indemnity received, how much pertains to the Vodafone Plc or Vodafone India tax refund? And secondly, on the indemnity, what is the likely amount that we will receive from the Vodafone Group in the remainder of fiscal '21 and in fiscal '22? So that's question one. Question 2 is, what is your sense on the market tariff right now? And you mentioned that -- Ravinder, you mentioned that the Jio pricing of INR 399 is a very tough move and much higher than their existing INR 199 price plan. So in your view, how does the prepaid market correct it's tariff in the days to come? And will you be taking many steps to take the pricing table up?
Akshaya, I'll take the second question first, and then I think we can comment on the -- for the second one.
Sure.
Vivek, on the market tariff, I think you have heard me say several times before that the current pricing in the market is unsustainable and is unsustainable because it provides either very low or almost 0 return on capital invested. And in a prepaid market, which is such a large market where all players are at large scale, And even then, if the return cannot be achieved, there is something wrong with pricing. And I think clearly, pricing in the market needs to be -- needs to improve. And I think there, the view is that in the short term, the ARPU needs to get to about INR 200. And then, of course, longer term, it has to get up to INR 300. And frankly, if you were to get to INR 300, let's say, another 2 years from now, we will probably be looking at going back to where we were in 2016 from an inflation-adjusted perspective will be at INR 300. So we'll be going back a 4-year pricing if we were to do that at this point. So certainly, from a pricing perspective, this is the right level of pricing and certainly, affordability there, especially if you consider had usage, especially data usage has gone up 10, 12x compared to very close 4 years ago. So I think that has been talked about. That is clearly the situation, and I think that's something that the industry needs to go to. I think 1 of the very promising thing that has happened in that space is that the government has shown recognition of that because clearly, not only has the government revenue, because the government makes a percentage of license fee and spectrum user charges based on the revenue of the industry has also seen a significant amount of revenue decline. And then, of course, through various discussions and the government has also started to look at a floor pricing revolution. As you know, pricing today in India is under [ procurence ]. But the government has started looking into floor pricing. They have started a consultation. The consultation was started and actually was moving along at a fairly good pace when the country got shut down due to the COVID lockdown. And then I think as the country emerged from the COVID lockdown pretty much towards the last days of the earlier Chairman of TRAI, I think that sort of didn't really gain any momentum till after. Now we have a new Chairman of TRAI, Dr. Vaghela, we are engaged with him. I think the industry is engaged with him. And clearly, just 1 of the topics on his agenda to bring that into COVID to see what can be done to do -- to put floor pricing because clearly, all the submissions from all the players have been that floor pricing needs to come in because pricing is well below the market price. Now there's floor pricing, and then there's, of course, in the interim, there's no reason why prices cannot go up in the first place. And they have been going up, ARPU has been going up because actually, all 3 operators decided to increase prices. Now we've talked about before that we will not shy away from raising prices and we could be the first one. We took that step last time. And then we are happy to be, again, the first one to take that stuff forward. And we have a fairly strong indication that, hopefully, the other players will follow as well. So I would say that between floor pricing as well as continued increases, I think 1 or 2 or both of these things can happen, should happen. And I would expect some activity to take place in a fairly recent coming time on each 1 of those things. And I think this is essential, and I have a strong faith that it will happen. Over to you, Akshaya.
Yes. So on the question of tax refund and indemnity, just to be clear, as we have explained earlier also that the total cap on the indemnity to be paid by Vodafone Group under this arrangement is about INR 84 billion. Under the current payment in the Q1 and Q2, cumulatively, we have received about INR 20 billion. So balance INR 64 million is to be received over the remaining period against the AGR liability. Also, as far as the tax refund is concerned, The entire tax refund, which was received in the quarter is on account of [indiscernible] Vodafone. So that is also part of the indemnity arrangement. Now just to be clear that at the time of merger, there were this about roughly INR 83 billion of tax refunds also out of which about INR 60 billion is still to be received. So all in all, the total credit in terms of cash floor that is expected towards the AGR cash, which will be available towards the AGR is INR 63 billion of cash contribution from Vodafone Group and about INR 60 billion of tax refunds, which have still to be received. In terms of the timing of received, these are linked to payments. So If the next payment happens in March '22, then the next receive Vodafone group will only be after that. I hope that answers your question.
Yes. Just a couple of small follow-ups. Ravinder thank you very much for explaining the pricing paradigm. Just to drill down a bit further on this. Are you saying that in the interim until say, a floor pricing comes through? Are you saying that we -- that you will also be happy to take a first step towards correcting the pricing? And if so, what are the factors that you are looking for before you decide to take this price hike? Reason I'm asking is that in December '19, we took a price hike, but our revenue did not grow. So just trying to understand, in a situation or under the circumstances, present circumstances, where we still have a coverage gap versus peers that you yourselves have admitted and will fix. How should we think about your own pricing approach?
So Vivek, the answer to that question is that I don't think that, first of all, that there's anything that stops the industry from increasing prices while core pricing discussion is in place. It has been done before, and I don't see any reason why it cannot be done again. While I think to maintain a healthy, let's say competition and actually for the health of the industry, probably floor pricing will be required because I think that is something that will have to be done to bring the industry back to normal. But in the meantime, some of those steps can be taken. And from our perspective, as I said, we are not shy to take the first step, we have taken it before and could take it again. In terms of thinking, I think our thinking is really focused on the fact that we have, as I mentioned in my opening speech, we believe we have the best quality network. It is not only said by us. It is also proven by all the third-party reports that we've seen. And certainly, Ookla, which is 1 of the most reputed in this space, they have given us the best network and then the most reliable network in the company. And I think certainly, that experience will now be available to not only our customers but other customers who want to test and enjoy the quality of our network. So from that perspective, I think the issue around coverage gap is less relative. I think the important thing is that the place that you cover, almost 1 billion population, where our network quality is good. And actually in the top 16 priority circles where we cover a much larger proportion of the population, our network quality is good, and we should see an impact of that. And I think there, as an industry, if the prices goes up, I don't see ourselves to be in a competitive disadvantage. So I think those things will -- we have to keep those in mind. The coverage gap, as we talked about, as in regards to funding, when we have the funding, we will cover that gap. But in the meantime, we cover a substantial portion of the country. And certainly, in our top 16 circles, we have very, very good coverage. And we think that, that will provide a great experience to our customers given the quality of our network as proven by not only ourselves, but also by competitors.
The next question is from Pranav Kshatriya from Edelweiss Securities.
My question is around the fundraising, which you talked about. Can you give us some color on what sort of discussions you're doing? What kind of fund raising you're looking at? And when do you expect that you can get any funding or funding within -- in the company?
Okay. Pranav, so as has been mentioned earlier, we have -- our Board has approved for us to raise up to INR 15,000 crores of additional debt and then up to INR 15,000 crores of equity. But as long as the total combination of that is INR 45,000 crores, which is the number that they have given us. We have -- since that time and then we have also received shareholder approval. We are actually in the several discussions with interested parties, both on the debt as well as on the equity side. And I have to say the interest, if you're looking for color, the interest has been very, very good. The engagements are ongoing. Obviously, I cannot tell you any more detail on what those are at this time. But certainly, they are progressing well, and I expect that we will have some conclusion to this in the coming 2, maybe 3 months, but hopefully even sooner rather than later. So that part is going quite well. And frankly, we are optimistic.
The next question is from the line of Sanjay Parekh from Nippon India EMC.
I had a question on the 4G addition. So now that our network integration is over, How do we -- what will your specific strategy to see that our 2G, 3G moves to 4G and we retain them? And also, very clearly, our market share in 4G addition significantly improves. So if you can guide us of what are the few things we are doing to get that in order?
Sure, Sanjay. I'll answer that question. So as you know, that for the last 2 years, 1 of the biggest things that we were trying to do during our integration exercise is, of course, consolidation of our work. But at the same time, improving our 4G capacity as well as our 4G coverage. Now the coverage has expanded significantly as we have done integration. And frankly, I think you're also aware that the way we did integration to avoid risk was we started with our low market shares, smaller revenue circles, and we had progressed them over to our bigger and more heavy market share circles. So actually our bigger circles were more back loaded in that integration exercise. Now that, that integration exercise is completed, and we have talked about how much capacity and coverage increase that we've done, just to talk about, we have over 1 billion population coverage in our 4G, the network and more than 2x the capacity, actually 2.35x the capacity that we had when we started the integration exercise and then in companies and more. So a significant amount of effort has gone into doing that. And clearly, as I said, it's evident because of the results that we've seen, not only from third-party approach, but also from our internal tests. [Technical Difficulty] Sanjay. So should I continue? So now that, that has happened. Now I think the main thing now is that before, while we were going through this exercise, it was difficult for us to communicate and talk about we were going to build because we were in the process of building. Also, from a brand perspective, we had really stopped investing heavily because we were going towards a single brand. So Sanjay, now the plan is that now that integration is behind us, our single brand is launched. We have not only the quality of the network that I talked about, it has been confirmed by third parties. Actually, the point is to really talk about the quality of the network, communicate that to the customer that the benefit that they get. They get to experience. They get to see it. And at the same time, for us to invite other customers who want to go from 2G to 4G, as you talked about how do we migrate them, give them that experience, let them test the quality of the network, get the experience and hopefully, they migrate over. And that is our strategy. Now this is not something that is new. This is something that has happened in the industry. We had been doing earlier. Our competitors have been doing it earlier. So this is something that we are good at. We believe now we are in a place where we can actually make that migration with confidence, given the quality of our network and the completion of our integration. And our efforts are going to be 100% focused on that part. So we hope and as you will see, already, I mean, we launched our new brand and completed the integration not very long ago. We already seeing positive track and momentum. I can tell you that just after less than 2 months after the launch of our brand, we're starting to see a positive momentum. So hopefully, this will continue. And I think this is something that we have to do, we will do and I expect positive results from that. So that is really the plan. But it's built around real, solid network experience as well as customer communication and brand push behind it. That is the -- we believe the right way can make it happen.
Sure, sure. Only 1 thing on this. Do you think -- I mean, our approach of go-to-market strategy, and it's not to do with capital or spend, I mean you very well, clearly explained how everything on integration is done. But in terms of our go-to-market strategy and seize that 4G customer and our own 2G customer, do you think are there any gaps or that is not an issue?
I think, Sanjay, I mean, earlier on as we were going through the exercise, there were clearly gaps. They were clearly gas because 1, we were putting our network through an integration. So when you are integrating and consolidating times with their outages, you have to turn the off, you have to add more capacity, you have to add more coverage and they were -- was there. Also, because the networks were not integrated, the coverage and capacity of the 2 brands were actually different and the capabilities were different. So from a go-to-market perspective, while we were doing the best that we could, and actually we did a thorough amount of exercise, the consistency of the execution and actually a common message was obviously missing because we have got 2 brands. And networks are not fully integrated and capacity and coverage that is getting pulled out every day, every week, every month, it is getting increasing over a 3 years time. Now [Technical Difficulty] so confusion or there is no discrepancy in go-to-market. It's a single brand [Technical Difficulty]
Excuse me, sir. I'm so sorry to interrupt. We're unable to hear you.
Janice, I also cannot hear Ravinder. Are you able to hear me?
Yes, sir, I can know you well.
I can hear you well, Janice. I'm not sure why you can't hear me.
Okay. Now we can hear you, sir. Please go ahead.
Yes. So Sanjay, hopefully, I answered your question. I'm not sure where you stopped hearing me. But the -- we don't see any gap in execution now that we have a go-to-market, now that we have a unified brand. And we have a combined integrated network. Our strategy is clear and our plan is clear to go to market. And as I said, this is something that we have been doing for years. And now with this integration completed, we have to just go back to the execution of that.
The next question is from the line of Ashish Aggarwal from Principal AMC.
Sir, I wanted to understand just 1 thing there on the tariff side, we said that we are not hesitant enough to take any tariff increases. Just wanted to understand what is stopping us? Is it, we are waiting for this floor pricing things to come up first and then talk about it or what is stopping us to taking that first step? And just secondly, on the profitability side, despite doing almost INR 8,000 crores of savings earlier and now almost 25% achieving on an annualized basis, our EBITDA on a ex Ind AS basis is stuck at that INR 1,600 crores quarterly level. So do you think that this will only move when our ARPU moves up to like 130, 140 levels?
So Ashish, on the tariff side, I mean I will repeat, we are not hesitant to make the first move. And -- but you have to time it a little bit. And what we have gone through in terms of completing our integration, launching our brand, building the brand synergies, I mean, these are things that we've been busy with that. I think the appropriate time, along with consultation with the government on floor pricing and what the timing and plans would be. I think an appropriate decision can be made, as I said earlier, I don't think it's too far away. Either 1 of those 2 decisions are not far away. And we expect to -- those to be in play in the coming period of time. But I can't reveal to you or tell you exactly how and when we will make that decision. On the profitability part, maybe Akshaya, I'll leave it to you.
Yes. So you see on the profitability, basically, we have kind of reported that we achieved INR 84 billion on the synergies post-merger and then In the last 2 quarters, we've roughly achieved 25% against the INR 40 billion guidance that we have given. Now these cost reductions are there and these are reflected in the [indiscernible], and these are necessary to do. But what you're saying is partly right that essentially the significant recovery in the cash generation from operations can only come from the tariffs going to the correct levels, which is not the case right now. So we are definitely working on things which are entirely within our control, which is the cost part. Of course, the tariffs is a function of what we do and what the market dynamics are. And we will be focused on that because that is the way the long-term health of the industry will improve.
The next question is from the line of Vishnu K. G. from JM Financial.
Just want to ask your thoughts regarding the data usage. So 1 of your competitors had also reported a slight decrease in the data usage post the easing of the lockdown. So do you think data usage will get stuck at these levels? Or do you think there are further headroom for the improvement in data usage?
Vishnu, I think the -- I mean, we went through a fairly unprecedented time, which is, we had a sudden lockdown, which took place in Q1. Everybody was stuck in their homes. And effectively, at that point, if you remember from last quarter, the usage skyrocketed. And we're talking about 30% type of increases at 1 time in a matter of few weeks because people were using that. And of course, the important part was our [ card ] networks held up to the quality and the increase even with those type of increases that were taking place, and we were able to do that and while we were still in lockdown. Now as the lockdown is starting to ease, as people are going back to slightly more life and business as usual, probably busy a bit more on doing other things that purely entertainment consumption, which was taking place, I think we will start to see the -- maybe the data consumption will come down a little bit. But overall, there is no, let's say, indication that data consumption or data usage in the industry is slowing down. It will go back to what used to be normal levels, and we believe that will happen. It's just that I think on a quarter-on-quarter basis, in some ways, because of the unprecedented nature of the lockdown and then where people work, actually, that changed, I would say, a little bit of a trajectory. So I don't see a big issue here.
The next question is from the line of [ Sanket Bahedi ] from GC Investment.
So 2 questions from my side. Sir, where do you think your subscriber loss or the subscriber numbers will get stabilize? Because on a continuous basis, there's a good amount of subscriber loss that has happened on a quarter-on-quarter basis. So what -- where do you think you will stabilize in terms of number of subscribers?
So Sanket, I hope that you are able to see that on a quarter-on-quarter basis, we have continued to show an improving trend, where the decline in customer base is slowing down. And I think many of these things were very much tied to the fact that we were integrating and consolidating our network, and we are going through this process. But as we have done more and more of that, that trend has continued to grow. And yes, you're right, there are still customer losses that are taking place. But I can tell you that not only are they reducing quarter-on-quarter, but even on a month-on-month basis, we see that coming down. So August and end of July and September and then August and so on and so forth. So I think we see that trend going through. And as now, as I mentioned earlier, with the quality of the network and the experience that our customers are having over the network as well as hopefully other customers who tend to get that, we believe that this will only improve as we go along. Also, the brand launch has a significant impact because as the brand saliency gets build and we talk about the quality of the network because we started talking about the quality of our network, given that network and we communicating that to the customer, more and more of them will start to experience it and they will come to test it. So we expect that to also improve the overall trend that [indiscernible] take place. So I think that will also move in the right direction as a result of that. The other thing simply that's important is that, again, in the lockdown phase, we ended up in a situation where gross additions, which are sort of the central part of the market function, were completely slowed down. Now we have seen a gain as the market has started to open up and gross additions have started to pick up. In our case, they have still not come to what I would call normal levels compared to where they used to be before the COVID lockdown, but certainly, we see month-on-month improvement taking place on gross additions. And I believe that trend will also continue, which means that in that sense, if we are able to hold on to the customers because of the quality of the network and we can talk about it, And certainly, our brand launch and our communication will help there and the gross additions improve. And obviously, hopefully, with that the subscriber mix improves, we don't see any reason why this trend will not continue and stabilization in our base will happen. So we are looking forward to that, and I can tell you this trend is happening and that is showing in our numbers, and we hope that will continue.
Okay. So just a follow-up on this. So within the quarter, maybe July, August and September, so based on whatever you have said, so it's likely the July to September quarter, the trend has reduced on a subscriber loss?
So I can't give you the details, but I can tell you that as we go along with the month, the trend has certainly improved, yes.
Okay. Sir, my next question is, since now all the liabilities and to give it a clear clarity on AGR. What will be the accrued interest during the quarter, total accrued interest cost during the quarter?
That cost is what is reflected in our P&L. So whatever is in the P&L, which I think for this quarter, the total financing cost is INR 4,128 crores, which includes about INR 1,100 crores or INR 11.1 billion on account of the AGR liability financing costs. So what has shown enough P&L is the figure which is accrued for you.
The next question is from the line of Arun Nahar from Alpha Enterprises.
Yes. Thank you for letting me ask you, there a lot of questions that are asked on this in a roundabout way. Can I just ask you a simple thing. Your competition is about INR 50 away on ARPU. Do you see that gap closing? and by when? And how much of it is a function of the fact that the gentleman from GC Investments just said is because of the customer bleed rate?
Arun, let me try to answer it. The reason why there is an ARPU difference is directly attributable to the mix of the customer base, the difference mix to the customer base. They have a higher mix of customers on UL/4G compared to ours, and that's the only reason why. We see, as we talked about earlier, that as -- because of the quality of our network, integration getting completed, And the fact that our customers now will get to experience what has been certified as the best network in the country, we expect more and more of that to continue, which means the saliency to improve on customers to come to our network and enjoy more of the 4G services, and of course, migration from 2G, 3G over to 4G, which results, always, in our [indiscernible] pieces. So the gap is just based on that. The issue for us is not catching up with their ARPU. The issue for us is that we want to turn more and more and we want to go down in the path where we are turning more of our 2G customers and other new customers who want to join our network and enjoy the 4G network onto our network and then ARPU results come across along with that. So this is the plan that we have. We now have the capabilities, given again, not only the quality of the network, the brand launch, the go-to-market plan. And we are already starting to see the results of that. So that is the trajectory we are on, and we will, of course, continue. And this is simply the plan. And by the way, this is the plan that other competitors are offered well. Unfortunately for us, we were in the middle of our integration, and they did some of those investments earlier than us. We have now completed our integration, our investments have gone in. The quality of our network is now evident and it's for everybody to see and experience. So we expect to get the benefit of that as we go to market with those plans as well.
Sir, if I can interject and interject with a secondary. Your competition is already talking about raising their ARPU, you are about INR 50 away from your next competitor. So do you have a timeline to at least reach that existing benchmark?
No, I'm not...
The minimum in a maximum timeline?
No, I don't think of my timeline as to reach the competitors ARPU. That's not how we think about things. What I think about is how do I provide a greater customer experience to my customers and how do I attract other customers to come and enjoy my experience, and migrate 2G customers to 4G. And the ARPU increases happen according to that. And we believe, again, as I said, the quality of the network and the [indiscernible] that we will start to do and go market execution that will happen will drive that. My intent is to do that. That's what I want to do. The intent is not to say that I have to catch up with them with my customer, with my competitors on an ARPU gap that is had. ARPU gap will automatically reduce as I do more and more of this.
Okay, sir. I still am not satisfied with what you say, but I'll leave it at that.
Thank you. Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Ravinder Takkar for closing comments.
Thank you, Janice. So to conclude, I think it's fair to say that we've had a challenging few quarters. With the AGR overhang largely behind us, we believe that we have turned a corner. We have launched our new unified brand Vi and that, coupled with our improved network performance, we are all set again to regain the customer mindset. We are making progress on our strategy and our cost optimization exercise has already started to yield incremental savings. We also initiated a fundraising exercise to support our strategic intent. We believe that this will help us in improving our revenue, profitability and our overall competitive position in the market. I thank you all for joining this call. Please stay safe and stay healthy. Thank you.
Thank you. On behalf of Vodafone Idea Limited, this concludes this conference. Thank you all for joining. You may now disconnect your lines.