Vodafone Idea Ltd
NSE:IDEA
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Good afternoon, ladies and gentlemen. This is Lizan, the moderator for your conference call. Welcome to the Vodafone Idea Limited Conference. [Operator Instructions]We have with us today Mr. Ravinder Takkar, MD and CEO of Vodafone India Limited; Mr. Akshaya Moondra, CFO of Vodafone Idea Limited, along with other key members of the senior management on this call. I want to thank the management team on behalf of all participants for taking valuable time to be with us. Given that the senior management is on this conference call, participants are requested to focus on the key strategic and important questions to make sure that we make good use of the senior management's time.I must remind you that the discussion on today's call may include certain forward-looking statements and must be viewed, therefore, in conjunction with the risk that the company faces.With this, I hand the conference call over to Mr. Ravinder Takkar. Thank you, and over to you, sir.
Thank you, Lizan. On behalf of Vodafone Idea, I welcome all participants to this earnings call. On Saturday, our Board of Directors adopted the unaudited results for the quarter ending December 31, 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.As usual, I will start discussing our ongoing strategic initiatives, along with operational highlights for the quarter. I will then hand over to Akshaya to share details on the company's financial performance. Our key strategic intent has always been to offer superior customer experience on both data and voice, which will help us drive better 4G additions and consequently improve revenues, 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 most important initiative is our focused network investment. We continue to have a focused approach to investments, the highest towards our profitable areas to utilize our CapEx effectively by ensuring that we offer superior customer experience in these areas.We are driving incremental 4G investments in our 16 priority circles, which contribute 94% of our revenues and 86% of industry revenue. We continue to add 4G capacity through spectrum refarming in these areas. We continue to progressively upgrade our 3G network to 4G. While our overall broadband site count stood around 448,000, lower compared to Q2 FY '21 due to closure of 3G sites, we added approximately 12,000 4G FDD sites, mainly through refarming of 2G/3G spectrum to expand our 4G coverage and capacity. Our 4G coverage is just over 1 billion of Indian population. Our relentless pursuit to become the best 4G network in the country is reflected in our top rankings across various third-party reports on both data and voice. Vi GIGAnet remains the fastest 4G network in the country for 2 consecutive quarters as per Ookla. Based on TRAI's MyCall App data, we also had the best voice quality in the country for the last 3 months consecutively. This is not only providing a great experience for our customers but also helping us drive stronger network reception, leading to better customer response in the market.While we are currently in the middle of our 4G CapEx cycle, we are deploying equipment, which is 5G ready on both radio and core. We have already deployed and are using array of 5G technologies, such as Massive MIMO, BSR, Open RAN, Cloudification of core, et cetera. We also have the largest edge cloud deployment in the country. While 5G ecosystem is still nascent, we are well prepared for 5G rollout as and when the ecosystem is ready.Our 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 and focus on driving 4G and UL plan penetrations. After the launch of our unified brand Vi, we have launched a very high-decibel campaign to announce that Vi powered by GIGAnet is the fastest 4G in India on TV, digital and outdoor media.We have also launched several digital campaigns during IPL, which is a great opportunity to connect with customers, leading to strong engagement and brand affinity. This quarter, we also launched weekend data rollover, an exclusive proposition to carry forward unused data from weekdays to weekends on all unlimited packs with daily data. Vodafone Idea continues to aggressively focus on digitization of customer services across all touchpoints. We now have digital acquisition in more than 100 cities for both prepaid and postpaid, including same day, doorstep delivery and digital KYC processes serviced through our dedicated delivery partners as well as our own stores.The third focus area is business services and new fast-growing segments. Business services remain one of our focus areas where we leverage our multi-year relationship with customers and global strength of Vodafone Group. Vi businesses continue to deliver growth by partnering both large enterprises and SMEs in their digital transformation programs, which have got accelerated during the pandemic.In new business streams, cloud services remain central to our growth strategy. We continue to maintain a clear leadership in IoT offerings, which has a potential to grow manyfold in the near future. We extended our market leaderships in IoT and connected vehicles segment with the launch of industry-first IoT eSIM, the first GSMA-certified multi-profile eUICC eSIM in the market. It is a game-changing and differentiated solution for automotives and other industries as the multiple network profile ease the deployment with simple OTA provisioning and reduce the overall cost of operations.Our IoT growth strategy is in strong alignment with evolving market needs of our customers. In our journey from telco to digital services player, we would be moving beyond IoT connectivity by offering end-to-end IoT solutions enabled by IoT partner ecosystem.The heritage of expertise and demonstrated success with our customers continue to be recognized by the industry with CIO Choice 2021 awards. The recognition basis an extensive pan-India CIO referral voting process that spans across industry verticals and guided by 9 member CIO advisory panel is for a range of our products and services. We were chosen as the preferred partner of choice of telecom carrier, mobile access for 7th year in a row. Managed mobility services, first time nomination and first win. SIP Trunk, second consecutive time; and Internet of Things for 4th time in a row. We are also awarded Frost & Sullivan India ICT Best Practices Award 2020 as the M2M Connectivity Service Provider of the Year.The next strategic initiative is driving partnerships and digital revenue streams. We continue to have several regional and global content partners. We recently added Voot Select and Fireworks to our extensive list of corporate partners, which continue to grow day by day. As stated many times, our strategy on partnership 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 the customers but also for the company and its partners.As we plan for future, we are now focusing on our platform capabilities to offer a deeper integration with our partners for a differentiated experience, create monetization opportunities and truly become an integrated digital service provider. As a big step in that direction, VIL has entered into strategic partnerships with key players in the area of learning and upskilling, health and welfare and business help to offer benefits to the new age customers.The company has forged partnership with upGrad, Udemy, Pedagogy, cure.fit, 1mg, MFine, Eunimart, Hubbler and Fiskl, and plans to onboard more partners under each of these areas to enable Vi users to get exclusive offers from these players. We will help -- this will help us drive more value for our customers and offer growth opportunities for these businesses.And lastly, we have made good progress on our cost optimization exercise. We targeted to achieve INR 40 billion of annualized OpEx savings by the end of this calendar year. Several of our initiatives are bearing fruition as are visible in the cost reduction across many of our OpEx line items. As of this quarter, we have already achieved approximately 50% of these targeted annualized cost savings.Now moving on to operational highlights for the quarter. Revenue for the quarter was INR 108.9 billion, a growth of 1% quarter-on-quarter, aided by higher 4G additions this quarter. As mentioned in our press release, our focus on being the best 4G network and the launch of our unified brand, Vi, has started to reflect in our improving operating performance. With improving subscriber retention, the subscriber base was 269.8 million in Q3 FY '21, a decline of only 2 million compared to over 8 million last quarter. Cross additions continue to improve as well as subscriber churn declined to 2.3% compared to 2.6% a quarter ago. At the end of the quarter, the 4G subscriber base stood at 109.7 million, an addition of 3.6 million 4G customers. We continue to see healthy traction in 4G UL net admissions will remain a key focus area for us. Now a quick update on some other developments. On the AGR matter following judgment on September 1, 2020, we had written to DoT to rework the preliminary demands adjusted for computational errors, admissible pass-through charges and payments made but not considered while computing the demand. We are still awaiting response from the DoT. But in the meanwhile, we have filed a modification application in the Supreme Court, which is currently pending hearing. As a matter of sub-judice, we will not be able to comment anything further.On Indus stake, as you are aware, the merger of Indus and Infratel was completed in November 2020. VIL has sold its 11.15% stake for a consideration of INR 37.6 million and has made a prepayment of INR 24 billion to the merged tower entity which will be adjusted in line with the terms of the agreement. On fundraising, our Board has approved fundraise of INR 250 billion through a mix of debt and equity. We are in discussions with potential investors, which are progressing well, and we expect to conclude this exercise soon.Lastly, spectrum options are expected to happen in March 2021. While we have submitted our application and will be participating in the auction, we will be unable to comment at this point on our option strategy, spectrum renewal or acquisition plan, given the sensitive nature of this information.With that, I hand over to Akshaya, who will share the financial highlights for the quarter.
Thanks, Ravinder. A very good afternoon to participants from India and a good morning or evening as applicable to overseas participants. And as mentioned by Ravinder, during the quarter, we have seen improved gross additions, better customer retention and higher 4G additions. Resultantly, revenue was up by 1% for the quarter to INR 108.9 billion as against INR 107.9 billion in Q2 FY '21. Adjusted for Ind AS 116 impact, EBITDA was INR 21.1 billion for the quarter, positively impacted by INR 3.3 billion due to amortization of subscriber acquisition cost over the expected customer life.Additionally, EBITDA improved due to higher revenue as well as incremental OpEx savings on account of our cost optimization initiatives. We are working on various cost initiatives to drive further savings and target to reduce our annual operating cost by INR 40 billion over Q4 FY '20 baseline by end of this calendar year. We have made good progress. And on a run rate basis, by the end of Q3 FY '21, we have achieved approximately 50% of our target cost savings. Q3 FY '21 CapEx stood at INR 9.7 billion. Net debt was INR 1,170.8 billion as at December '20 as against INR 1,145.1 billion in September '20. Out of this, the debt to banks and financial institutions is INR 231.7 billion, and the balance is owed to the government towards deferred spectrum payments.On AGR, as Ravinder mentioned in his remarks, we have approached Supreme Court requesting them to allow DoT to make corrections for manifest errors in DoT demand. As the matter is pending hearing, we currently continue to recognize AGR obligations based on the demand figure informed by DoT to the Supreme Court. With this, I hand over the call back to Lizan and open the floor for questions.
[Operator Instructions] The first question is from the line of Kunal Vora from BNP Paribas.
First question on tariffs. Like what's stopping you from raising the tariff? Airtel has clearly said that they are not going to initiate a tariff hike. So if you can share your thoughts on what will trigger the tariff hike? And if you can update us on the floor tariff, anything which you're hearing from DoT? That's question number one.I'll just go through all the 3 questions. And then I'll leave it. So second one -- can you share your thoughts on 4G services? How long do you expect these services to continue? And at what level of revenue contribution you might consider switching it off?And finally, on prepaid customers or the -- sorry, postpaid customers, the number is still down about 10%. What's been the reason for this when Airtel is seeing healthy additions? And if you can talk about the impact of M2M, like machine-to-machine if it's still hurting your numbers. So that's it from my side here.
Okay. Thank you, Kunal. Let me try. And for some of the items I will ask Akshaya to jump in as well. Starting with your first question, Kunal, on the tariff, I think we've said it earlier, and I think everybody in the industry continues to say that the industry needs tariff hike. All players have acknowledged that. It's common knowledge that services are being sold well below the cost of capital and the returns are abysmal in the industry.Now -- and then your question was about floor pricing, which is also another way. So one way is to increase tariff hikes or increase the tariff or the other way is for the government to institute floor prices. As you are aware that the regulator had floor pricing consultation. They are in the middle of that.The change in regulator or the Chairman of the TRAI changed in the middle in September, just after the pandemic and things then started to open up. I understand that, that review and work on that area is continuing. So either one of those 2 could be a way to improve the health of the industry.Now in regards to your comment about our plans, I think as you would hopefully see and then appreciate from where we are as a company, since our brand launch in September, Vi has started to gain momentum and traction in the market, not only we brought this unified brand, but overall, you would see the gross additions in the market improving. Our 4G subscriber growth, UL subscriber growth is starting to grow. Net adds are becoming more stable. I can tell you our engagement with customers is improving significantly. And so overall, we see a lot of positive momentum that is starting to take place. And with our fundraising discussions that are going on, we see overall a positive trend within our company.Of course, we've also mentioned that we will not wait for anybody else to join, but we may also raise prices at the right time. And the right time will be when the right time is. I can't tell you that exactly what it would be, partly because I think it's clearly a competitive issue as well. But at the same time, how much, what time and so on are things that we will decide at the right time in the -- and what is the right opportunity to do it. But we are not waiting for anybody in particular to raise tariffs. And we believe that we are in the best position as a company to raise prices and increase tariffs to how much we need, we will take those steps and actions.In regards to the 2G service, I think this question has been asked before, but let me say that I think that 2G service will continue to stay for a fairly long period of time. It is not only an example in India, but it's an example in many, many vastly developed countries where 2G service continues to be a very good and an optimized way of doing some services like voice, GSM voice, but also for IoT and a few other things and then the narrowband IoT services. It continues to be a very positive way of doing it.From our perspective, there is no increased cost of 2G service. 2G service is there. It runs, and it's actually very, very effective. What we are doing is on the 3G side, which is the service that we closed before, we are continuing to shut down 3G services in many markets. In fact, we have shut down 3G in about 31 cities across the country already, and we found the spectrum to use 4G services, and that will continue to happen. I don't expect the 2G services to continue to decline. I don't see the 2G shut down anytime soon.And your last question was around postpaid. I have to say, I'm not sure where that 10% number is coming from. There is a slight decline in postpaid. But it's not a significant decline that has taken place in this quarter. We are starting to see positive traction in -- certainly in the postpaid business. Machine-to-machine is actually after the pandemic because during the pandemic, any other services such as people using for payment machines and so on, those services were either not being used or being disconnected. We're seeing a recovery of that, and we expect the postpaid business to continue to do well. We are not seeing any, let's say, material decline or fall back in that particular part of the business.
Sure. Just a small follow-up on the last one. So 10% is the number which could derive year-on-year about 2 million, 2.5 million customer decline, most of which happened like immediately after the pandemic, but that number is not fully recovered because the fact I would mention that that's because of M2M, but M2M should have recovered by now. So just wanted to get some sense, is it that the like 2 million, 2.5 million customer decline which you've seen in postpaid for the last 1 year, is it in the weaker circles or it's broad based?
So I mean I can't -- obviously, this is not information that we share, Kunal. What I can tell you is that if you look on a quarter-on-quarter basis, as you move forward, we are seeing the decline to be much, much more slower, right, in the -- every -- on a quarterly basis. And I can tell you that the positive momentum in postpaid is certainly back and the machine-to-mission businesses also very well recovered after the pandemic. I mean these are the only details I can give you without going into the exact numbers.
And Kunal, if I may add, some of this reduction, which you see in postpaid is also migration from postpaid to prepaid because of the price arbitrage.
Understood. Understood. Just that Airtel is seeing a healthy addition the last 2 quarters. So there's a disconnect equipment what you are seeing and what Airtel is seeing. So that's where the question was coming from.
Yes. No, Kunal, I think -- I mean, we are -- obviously, we're seeing a positive trend, and we expect this positive trend to continue, I guess, is the [ right way ] to say.
We'll take the next question from the line of Vivekanand S from AMBIT Capital.
Thank you for the opportunity. I have a couple of questions. One, by when would you need to raise capital to meet your own March '22 4G coverage, population coverage target of 1.15 billion. Also, if you could help us with your present 4G coverage in the priority circles. You had said that it was 83% in March '20 and you have targeted that to go up to 90%.Second question is on the recent weekend rollover that you announced, the weekend data rollover. Isn't that this at odds with the tariff hike plans that you may have, given that this seems dilutive to the tariff hike narrative as far as the 4G customer base goes?And thirdly, the gap between your reported ARPU and computed ARPU, that continues to widen. So I know that your -- the reported ARPU is computed on services revenue and excludes infrastructure, fixed line and device revenues. But the -- I mean, this gap seems to be widening now when I multiply the reported ARPU by 3x the average customer base. And when I compare it with the reported revenue number, that gap has increased. Could you help us understand that better?
Okay. Thank you, Vivek. Let me take some of them, and I'll pass a couple of them over to Akshaya. I think in regards to the capital raise itself, as I said, we are fairly well advanced and well underway. We don't really expect any changes to our targets that we had set for March '22 in terms of our coverage and so on based on where we are in the fundraising process. So no significant change. At this point, we don't see that, that is something that will either get delayed or modified compared to the numbers that we had shared earlier.On the 4G priority circles, clearly, part of the going from 83% to 90% is part of fundraising process was that we will use that money to focus on continuing to increase our coverage in those circles. I can tell you that we've added a significant amount of capacity in those circles, and we continue to enjoy -- because of the quality of network, we continue to enjoy great experience for our customers in those circles.As I said today, our focus is very much on maintaining capacity and providing a great experience. Our increase in coverage in those circles will come alongside with the funding that will happen. So we are not significantly different than the number that we had shared with you earlier in regards to our population coverage in those 4G priority circles. Then I think your next question was around weekend rollover. No, I don't believe that is in odds at all. I think there's a great -- a way in which the customers who have to, let's say, not necessarily use this data than they had purchased to use it at a time when it's [indiscernible]. I think what is actually -- what we are trying to sort of go towards which makes much more sense in our minds is that customers buy a certain amount of data and they should be allowed to use that certain amount of data within the timeframe that they purchased it for.Actually, the concept of creating this daily limit by itself, which was created by some of our competitors actually is, in my view flawed, and it's not the right way. So I think in some ways, it is starting to change, hopefully, in a small way in the industry and eventually get to the right place, which says, people buy a certain amount of data, customers buy a certain amount of data. They get to use it whenever they wish to use it as opposed to if you don't use it today, it gets, let's say, you don't use it or you lose it. That's really not the right way.So if you buy a data pack for 28 days, you should be able to use it for 28 days. So I don't think it is an all-good-type hike at all. I think it is providing an experience to the customers and actually meeting their needs, especially after they have purchased the plan that they have purchased. Now on the fourth part, Akshaya, I'd pass it over to you for the reported versus the computed ARPU number.
So thanks, Ravinder. Vivek, actually, you see reported ARPU is the correct consumer ARPU. If the divergence is happening as you are calculating, it is because maybe the other streams of revenue other than the consumer revenue are going faster. That's the only reason. Now there could be some final impacts because the ARPU -- I mean if you use to calculate the derived revenue based on ARPU and number of end-of-period subs, there may be some difference based on the average subs. But largely, it shows that the enterprise revenue is growing at a faster rate than the consumer revenue.
Understood. This is helpful. Just a couple of small follow-ups, data queries, actually. Would you be able to help us with how many 3G sites you are still running and timeframe that you are looking at for the shutdown of 3G services? And secondly, in the consumer ARPU, how much is the IUC-related ARPU contribution? That would help us because from the fourth quarter, we need to take that into account.
So if I can answer the question. As far as the ARPU question is concerned, generally, interconnect is about 10% of our overall revenue, not necessarily of the ARPU. So you can take that as a guideline. So of course, from the next quarter, this revenue will go away, costs will also go away. So that was the first part. I think in terms of 3G sites, I will not be able to share that data with you. But the direction which we are taking is that 3G is not required anymore.It has been continued only because some people have devices, which can be used only on 3G and not on 4G. As and when in a given geography, the subscribers are coming to a lower number, then we are taking market interventions following up with customer so that we can discontinue. Ideally, we should be done with our 3G closure in FY '22, and our intention is to do it as fast as possible while keeping the consumer requirements in mind.
The next question is from the line of P.D. from Lansdowne investment.
I had a question around your fundraising plans. If you could please share a more detailed update and why is it taking so long to close? Because on the last quarter's call, I believe it was mentioned that it was expected to close in the coming quarter. And what are the reasons why it is taking so long, especially given the high level of liquidity that we are seeing in global markets and even some of our competitors being able to raise funds very quickly. And now what is the expected timeline by when we can hear some closures on that aspect?
Okay. P.D., just to clarify, first of all, I don't believe that this is taking an inordinate amount of time. I mean this is -- it takes time to raise funds. I don't know how it can be compared to some of the other competitors who you say have raised fund faster because I'm not aware of their timelines of how quickly they raised their funds. All I can tell you is that we are very well engaged. There is interest in various participants in helping us with fund raising. And we are very well progressed. Now when exactly is that, now I will shy away from giving you a date because this is something that it will happen when it will happen to get closed. I really don't think there's any point in putting a date to it.We understand that this is important for us. Clearly, as we've shared and also planned, we said that we are hoping that some of this funding will help us in our CapEx as well as network rollouts that we need to do. But certainly, as the question was asked earlier, do we expect any changes in our rollout plans based on our current fundraising, where we are, and we've said no to that. So hopefully, that gives you an idea of how quickly we'll be able to raise it. But all I can say is that I don't believe that there's any inordinate delay. And I don't believe that this is something that it is now [indiscernible]. I think we are at a fairly developed stage, and the demand continues to be very, very positive.
Okay. So there is clear interest from a set of investors. It is not a question of lack of interest from investors. That's not a cause of concern. Am I right?
Yes. No, no, there is interest. Of course, until you get the money in the bank, it's all interest and so on. But I can tell you, I can confirm with you that there's absolute interest in this investment and going into our company.
We'll move on to the next question that is from the line of [ Vikash ] from SocGen.
I think I had the same question the previous questioner has covered. So I'm good with that.
Okay. Thank you, [ Vikash ].
We will move on to the next question, that is from the line of Vishnu K. G. from JM Financial.
Just wanted to know, like, I mean, sometime back, we were looking at monetizing our noncore assets like [indiscernible]. Could you please provide some color on where we are in the journey? Or is it in the backburner for now?
No, I think Vishnu, our focus very much at this time is on fundraising. I mean I would say, our focus very much actually is on improving and continue to have good operational performance as well as engagement with the customers, which I've talked about earlier. That's going well. We are focused on our fundraising, which also, as I mentioned, is going well. So that's really our focus. I don't think we are, at this point, actively doing any of the noncore asset monetization discussions because I think they are -- it's probably -- it's not the right time to do it. We had done some work on it earlier, but it's a bit on the backburner now.
The next question is from the line of Sanjesh Jain from ICICI Securities.
A few questions from my side. First, on the digital partnership we are running with various partners, just wanted to understand what kind of monthly GMV run rate are we in terms of selling the product and services for our partners? That's the first question, to understand how deep and how strong the relationship we have with them?Number two. On the 5G side, we did touch upon the readiness, but it looks like one of your partner is now doing the trial run based on dynamic spectrum sharing. Which we have earlier tried -- have been actively doing on the 4G side. How ready are we in terms of extending that service even for the 5G? And which other spectrum band do you think we have enough quantity to provide that service.Number three, more a data point question. What is our EBITDA contribution from IUC that would be getting out of from next quarter? These are the 3 questions.
Okay. Thank you, Sanjesh. And on the partnership side, I have to say that this is actually one of the very, very exciting areas. As I mentioned, we have actually built out several strategic partnerships in the last quarter. The 3 areas of focus that we had initially is really on learning and upskilling, health and wellness, and then on the business side, which I think are all 3 important areas, especially given the current pandemic situation and where the economic situation is because people are looking for learning and upskilling and one, of course, health is a very critical area as businesses who struggled through this pandemic are looking for help and how they get to digitalization part. And I gave you example of several partners where we have done work in terms of bringing them onboard.Our approach to partnership, just to be clear, Sanjesh, is very different. What we are trying to do is to do what we call deep integration, which means that in some ways, the benefit of us and the partner coming together is better than and more important than just us being a potentially reseller of their services. And sometimes those deep integration, depending on the services, involve more than just us becoming a reseller, it could be authentication, could be other ways in which we integrate this service together. So those things are actually quite exciting and doing very well.What I cannot give you, and I don't think we provide this data, I mean certainly, it's early days anyways to give you the GMV, as you have talked about. But I can certainly tell you the response in the market and our customers have been positive. But it's too early at this point, and it's not something that we disclose anyway. I'm not even sure if we have the authorization to disclose from our partners exactly the value. But the categories of partnerships are very exciting, and they are seeing good traction, and it's really the right time in what's happening in the country at this time anyway.In regards to the 5G readiness, we have always said that we are -- our network is very much 5G ready. We are the [ newest ] 4G network in the country. And as a part of our deployment, we have continued to deploy 5G-ready technologies. I think it's somewhat interesting that one of the competitors is showing DSR in a lab environment, whereas we have been running it practically on thousands of sites in a production environment for a very long period of time.So I'm not really sure what the purpose of showing that is, but we have been doing these things. It's running. It's in production. The technology is the same, whether you use it for 4G spectrum or 5G spectrum. It doesn't really matter. The spectrum is spectrum the way it works. So we expect that to actually be the most well-tested investment, most pure in our network. And certainly, when the time is right for 5G, we expect to be in the best position to take advantage of that.Anyway, we've not just done DSR. We've done Massive MIMO. We've done Cloudification of the core. We've done -- there are other elements that we've also got in, which are, in our view, are very well tested. We have spectrum in 900, 1,800, 2,500 band as well in both to make sure our TDD and FDD. And all of those places DSR can be used. On the EBITDA contribution, Akshaya, over to you for the last question.
Yes. Sanjesh, EBITDA contribution, which will go away in the next quarter is about INR 80 crores on account of interconnect going away.
So INR 80 crores is the quarterly hit because of interconnect getting discontinued.
That's right.
Just one follow-up for my earlier 5G question. So when we say DSR and now that we are closing 3G so that it's dedicated 4G. But -- and luckily, 5G is evolving very strong on 25 megahertz. We have the spectrum over there. Do you think that combination of 1,800 and 2,500 puts you in a better place for 5G in terms of readiness for the 5G services? And when we see dynamic spectrum, what kind of actually cost is involved in transforming the network from being a standalone 4G to a more dynamic spectrum. The 3G, 4G was more a part of transformation and merger. This would be more of a network upgradation. So I think it will involve an incremental cost. So what kind of a cost, a ballpark number or even directionally will be very helpful.
So Sanjesh, I mean, in terms of, first of all, and usage of spectrum, the idea is that we are currently -- we have already deployed DSR, and we are currently using it within the networks. It's mostly being used between 1,800 and 900 right now. And -- but there's no reason why it cannot be extended to 2,500. The network is already ready. It's a matter of then stripping on the software element depending on the number of sites that we want to turn around.And so there's no -- for us, the -- given the fact that the network is ready, it's a matter of only software upgrades that need to happen. I'm sorry, but I can't give you the cost. One because I'm not sure if I'm allowed to disclose it. And honestly, I couldn't give you that off the top of my head anyway. So maybe we can have a discussion off-line Sanjesh if and when there is something that is interesting to you, but I certainly can't give you that number on this call.
The next question is from the line of [ Gopala Krishna from HNI Investments ]. Mr. Krishna, your line is in the talk mode.
Actually, what I would like to request management is that every quarter this depreciation and amortization is around INR 6,600 crores per quarter is being taken out and whereas the CapEx is very, very less, it's around INR 1,000 crores. So this -- I think this would give the Vodafone Idea enough cash cushioning, so that do you really need the funding for the network upgrade is my question.And the next question is like the subscriber, this is very good to know that in the December, month of December, it appears that we have gained the customers instead of losing the customers. Is this trend continuing in January as well? That's all from my side.
So Ravinder, if I may just take the first question and then you can address the second one. So I think [ Gopala Krishna ], the comparison which you're making between depreciation and CapEx is generally applied in a situation whereby the D&A is taken as setting aside of profit so that it does not get distributed to shareholders, which is a very different concept. Here we are talking about what is the requirement of the business to grow, and the funding requirement is that it has really nothing in our context to do with depreciation and amortization. And Ravinder, over to you for the second question, if there was something.
Yes. So [ Gopala Krishna ] on the question the question about subscribers, as I mentioned earlier, I think we are seeing a very positive trend on subscribers in all metrics, whether it's gross or reduction in churn and net additions, especially -- actually, we're seeing strong on 4G and UL. So all of those areas are going up. And I think the trends are all positive. I can't give you a number, obviously, on January, given that we are talking about Q3 results. But I will say that we are seeing very improved traction in each of these areas or subscriber numbers, in general, on all key metrics.
Just a follow-up question. I know that a particular number cannot be given. Just a small question is, in January, did we stop losing the customers?
I don't think, [ Gopala Krishna ], I can answer that question, given the forward-looking nature of that. And it's just not something that we disclose on a month-on-month basis in any case.
The next question is from the line of [ Paras from PDC ].
Yes. This is regarding what the ARPU is we are likely to target for the next quarter.
Sorry. [ Paras ], I didn't catch that. Could you please repeat?
This is regarding what the ARPU is we are likely to target for the next quarter.
Are you talking about ARPUs?
Yes, ARPU. Yes.
ARPU. Again, I don't think we disclose that number, especially forward-looking. We have seen now that on a quarter-on-quarter basis, this quarter as well as last quarter, we have seen ARPU improvement. And obviously, we hope that trend continues. But this is not something that we provide guidance on, on a forward-looking basis. Akshaya, maybe you want to jump in there as well and confirm?
No, nothing to add from my side.
Okay. But looking at the CapEx savings, which we are doing, I think ARPU will be increased at a greater extent, right?
I mean just to make the point that CapEx is diverted towards -- or is meant to either expand the coverage or capacity which is essentially meant that we can either take more subscribers, which may not result in improvement in ARPU. But if it is directed towards creating capacity so that the subscriber can use more, that can result in a higher ARPU. So it can have both things.As we have said, I think, earlier also that currently, we have a very good capacity position. Which is reflected in the customer experience, which is reported by third parties. So really speaking, at this point of time, CapEx is not a factor immediately, which is impacting the ARPU. We have sufficient capacity to increase the traffic on our existing network to improve the ARPU, if that is the question.
We'll move on to the next question. That is from the line of Sanjesh Jain from ICICI Securities.
One last thing I wanted to touch upon is YOU Broadband. We have seen competition adding a strong subscriber base. So understand we don't disclose a lot of information over that. But you can just highlight what kind of customers we are seeing, what kind of growth, and what is the ARPU we are looking at YOU Broadband? And what are the plans around YOU Broadband for us?
Akshaya, I don't think we disclose any information, but you may wish to add.
Yes. Sanjesh, so I think we are not giving any separate disclosures for YOU Broadband. All that I can say is that I think in terms of our priority of investments, that is not a priority area. However, I think post the lockdown, we have seen some improvement happening in the performance of YOU Broadband as demand for these fixed line services have shown some improvement.
Got it. But we are not disclosing even the subscriber number or what kind of ARPU we are doing in the YOU Broadband as of now?
Not right now. I've heard you. Let's see what we can do going forward. That has not been a focus area in terms of disclosure. But since you've raised that question, we'll look at that and see what we can start doing from next quarter on.
The next question is from the line of Vivekanand S from AMBIT Capital.
Is the entire INR 128 billion current maturity of long-term debt payable over the next 12 months? It would be great if you can clarify how much leeway our existing vendors are giving us since the industry continues to remain in an extraordinary state of stress and low tariffs?
So I think Vivek, just to be clear, the figure which you are talking about, which is the current maturities of debt, that has nothing to do with the vendor payables. It is all financial institutions. And as you would have seen in our disclosures, actually, the debt which is falling due for payment over the next 12 months is more like INR 30 billion.The balance amount is largely reclassification of debt, which has a longer maturity, but which is reclassified because there are some breach of covenants where waiver has not been given explicitly by the lenders. So from an accounting perspective, it has to be reclassified to current maturity. However, there is no likely action from any of the lenders to force those maturity. So it is more an accounting reclassification than anything else.
The next question is from the line of Pranav Kshatriya from Edelweiss.
I just have one question. In -- when you're talking about 5G, you talked about 5G ecosystem not being mature. And you will look at investing at an opportune time. Can you specify what would be the key factors, what you will describe as that opportune time is there? Will that be something around the number of 5G handsets versus the proportion in the total handset shipment or something like that? What parameters you'll look at it?
Pranav, there's multiple elements to the ecosystem, right? So one, of course, is the actual network and the capabilities in the network itself. Many of those capabilities already exist. And as I said, we have deployed actually many of them. And they are, in some cases, already working within the 4G spectrum bands for us.Then of course -- and of course, it has been deployed across the board as well. And of course, there is the device ecosystem. I think this certainly [ for intel ] is very, very important. Given not only the price sensitivity of the devices itself, but also the price sensitivity as well as the volumes that come.In India, of course, when any service gets picked up at a large mass market, you need many, many devices at a very, very cheap prices. And while devices are coming and they're cheaper, it certainly is very far away from where today, for example, 4G devices and their availability is from as well as pricing is concerned. So I think that's certainly will play a very important role.The other element, of course, is unique spectrum. And while we can do many of the 5G technologies on existing spectrum bands that we have, the larger quantity of spectrum to get the real wideband service, you need most likely in the 35 megahertz band. And that is something that is obviously not up for auction, and it's very expensive in our view from where we are in terms of the pricing that we believe is the right price. So obviously, that is part of the ecosystem that has to develop as well.And then the last thing is, when you say the ecosystem that has to be sort of services and use cases for which 5G is needed and 5G is required, let's put it this way, and it cannot be done on existing technologies, so to say. And I think those are another area where there continues to be a lack of clarity and lack of use cases, which are, I would say, coming out clearly to say that these use cases require 5G technology and 5G spectrum and those are not there worldwide as well.We're seeing that the biggest use case for 5G tends to be on adding capacity. So if you have capacity on 4G sites which are congested and you want to add more capacity, sometimes 5G spectrum is cheaper. Given the amount of spectrum that we have and certainly is available in the upcoming auction, we don't see, again, that as being a big problem in the Indian context right now. So hopefully, that gives you an answer to your question, Pranav.
Yes, it does give me an answer. But I mean, especially the -- if I just probe in a bit on the last point, you talked about that the application ecosystem or the use cases not being ready. But for whatever reason, that has been the case globally. And still, the companies have tended to add on to -- or rather hop on to the 5G bandwagon. So do you think that at some point of time, you will be forced to get into it because the competition has already got into it? Can that be also a reason or a part of the ecosystem equation?
Pranav, it is very difficult to answer that question because we don't know what will happen in regards to what happens in the market and what competition does. What I am telling you is that from where we sit today and what I see as the ecosystem and what I see in the industry, the use cases and the ecosystem of 5G development in India is still a bit away. So I think what you hear and what you see today is more, let's say, talking points and to some extent, it's more to something to talk about rather than actually use cases. We don't see any of those developments.As I said, we have technology and has been around and deployed for a very long period of time. In our network, certainly, many of these things running for a year. But without the ecosystem, those are irrelevant, and we continue to use them on 4G anyway. So I think it's very difficult to say what competition, of course, will do and how it will go. In many cases in the world where it has been deployed, there has been mostly to add capacity when 5G as -- 4G has become congested. And there, I think there's clearly a use case, which is being deployed in several countries.
Sure. I'll just take one last question. One key component of the 5G is probably -- it's not really necessarily 5G, but one thing which is clearly coming out is RAN virtualization. And that clearly -- I mean, although you might be ready in the core or the transport side, the RAN virtualization is not what everybody has done. What are the pushes and pulls when you are implementing a virtualized RAN solution in either a 4G or a 5G environment in terms of the CapEx, basically.
Pranav, it's a very complex and a detailed question. And I request that we potentially take this off-line because it's not something that I didn't want to give you an answer, which is not very clear. And what you're asking, I know, is quite a complicated question in terms of the detail because there's not a straightforward answer to that -- for that question.
Sure. No problem. Very, very useful.
Ladies and gentlemen, that's the last question. I now hand the conference over to Mr. Ravinder Takkar for his closing comments.
Thank you, Lizan, and thank you all for your questions. So to conclude, I would say, our strong focus on becoming the best 4G network in the country is yielding results, which are reflected in not only in the top rankings that we have received from several third-party reports. We are also starting to witness healthy trends across several subscriber metrics with improving subscriber retention and good traction on our 4G and UL additions.We are making progress on our strategy. Our cost optimization efforts have already started to yield significant OpEx savings. Our additional fundraising process will help us achieve our strategic intent, and that continues to be well on our way. And hopefully, it will create a very strong competitive position for us in the market. Once again, I thank you all for taking the time to join us for this call. And I look forward to talking to you and many of you off-line as well. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Vodafone Idea Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.