Vodafone Idea Ltd
NSE:IDEA
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Good afternoon, ladies and gentlemen. This is Nirav, the moderator, and welcome you all to the Vodafone Idea Limited conference call.
[Operator Instructions] Please note that this conference is being recorded.
We have with us today Mr. Akshaya Moondra, CEO of Vodafone Idea Limited; and Mr. Murthy GVAS, CFO of Vodafone Idea Limited, along with other key members of senior management on this call.
I want to thank the management team on behalf of all the participants for taking valuable time to be with us. Given that the senior management is on this conference call, participants are requested to focus on 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 now hand the conference call over to Mr. Akshaya Moondra. Thank you, and over to you, sir.
Thank you, Nirav. A warm welcome to all participants to this earnings call. Yesterday, our Board of Directors adopted the audited results for the quarter and year ending March 31, 2023. All the results related documents are available on the website, and I hope you had a chance to go through the same.
Let me provide a brief on our strategic initiatives and key highlights for the quarter. Post this, I will hand over to Murthy to share details of company's financial performance. First of all, during the quarter, we have completed the issuance of equity shares to the government towards slowing of INR 161.3 billion, representing the NPV of interest related to different AGR and spectrum. We have also completed the process of issuing the OCDs worth INR 16 billion to ATC India in February 2023.
Moving on to our strategic initiatives. Firstly, it is about our focused investment approach. We continue to follow a focused approach to investments biased towards our 17 priority circles, which contribute over 98% of our revenue and around 93% of industry revenue. This helps us in utilizing our CapEx effectively while ensuring that we continue to offer superior customer experience in these areas as our network investments have been impacted on account of liquidity constraints.
To improve our 4G presence and 4G experience for our customers, we continue to reform our 3G spectrum to 4G and have closed around 1,850 3G sites during the quarter, while we added about 1,950 4G sites as a result of a broadband coverage as well as capacity has expanded. Our relentless pursuit to offer 4G experience or better 4G experience to our customers is clearly visible through these network investment initiatives. We also have the highest rated voice quality in the country as per app data for 25 out of 29 months between November 2020 and March 2023.
Moving on to market initiatives. Our brand reach continues to garner a good reception, building brand acidity across all customer segments in the country. The company continues to make extensive progress on the marketing front by communicating key differentiators to consumers, entering into alliances and introducing various innovative products and services. Our refreshed postpaid offering with more benefits, more data, more entertainment and more privileges that is the MAX postpaid, which helps a differentiated offering from competition was promoted extensively through TV, digital and retail channels.
In a cricket-obsessed country, your company engaged with the users through Vi20 FANfest on social media and staged one of the busiest plans during the first Women's Premium League 2023. We have to engage with users and to promote our music offering on social media during Valentines day. Our relentless pursuit on the marketing front is clearly visible with our top rankings at the ET brand equity, India DigiPlus Awards where we won Silver for Best Use of performance marketing and Bronze for digital campaign in the B2B category. We continue to focus on getting more customers on 4G/unlimited plans for further ARPU improvements.
We have seen ARPU growth for 7 consecutive quarters now. Q4 FY '23 ARPU stands at INR 135 compared to INR 124 in Q4 FY '22. A growth of 9.3% year-on-year, highest among wireless operators. Our share of gross additions was higher than our subscriber market share clearly reflecting our ability to effectively compete in the market. Moving on to business services. Business Services or Enterprise segment is one of our strength areas coming to our long-standing relationships with our enterprise customers as well as our ability to leverage from the experience of Vodafone Group in various global markets.
We continue to make progress in line with our stated strategy transformation from telco to a techco for our enterprise offerings. Our planned expansion of services beyond connectivity has seen good traction, and we continue to work with multiple partners to make our offerings more relevant to enterprise customers. On IoT, we continue to maintain our strong position with innovative solutions for large enterprises as well as for small businesses, and it continues to grow at a very healthy pace. In the smart utility space, we have an unparalleled track record in powering India's energy infrastructure by providing innovative IoT solutions and becoming a partner of choice for advanced metering infrastructure projects.
We are currently working with over 25 power distribution companies and successfully connected 3 million-plus meters in the country. We aim to strengthen the company's Digital India mission and transform the company's power distribution sector through our IoT solutions. As part of our strategy to transfer from a telco to a techco, we continue to build our cloud portfolio. We are working on our cloud strategy through a combination of our own assets and strategic partnerships in order to accelerate digital transformation for enterprises.
Our comprehensive cybersecurity portfolio, we secure, provides a range of reliable solutions that offers protection against multiple threats arising from network, cloud and endpoints, enabling businesses to achieve their digital objectives in a secure manner. Our Ready for Next program continues to support SMEs and MSMEs in digital adoption, transforming their businesses and making them future-ready. Since its launch, Ready for Next has been assessing the digital needs of more than 80,000 MSMEs in India, offering them the right set of solutions for their digital journey.
The Ready For Next campaign has been awarded on multiple national platforms like E4M, Indian Marketing Awards, AT brand equity, digital awards and Mint marketing awards. In the growing hybrid working scenario, Vi Business Plus mobility bundling solutions are enabling today's mobile workforce to connect, communicate, collaborate and do a lot more with their postpaid plans. Bundled with benefits such as data pooling, mobile security, location tracking and entertainment, Vi Business Plus provides superior customer experience with seamless and uninterrupted high-speed data. Vi Business is also an active participant in the fixed data connectivity business and continues to enjoy the confidence of some of the largest multinational and Indian organizations to connect their offices and various locations through its suite of MPLS/GMPL solutions.
Vi Business is also doing pioneering work in the space of private networks through our active and deep engagement with a large customer base. We aim to participate in building the private networks infra in the country in a relevant manner based on customer needs. All these initiatives and efforts enabled us to register an annual revenue growth of 10% in enterprise revenue, excluding mobility. Vi Business continues to garner recognitions at national and international levels.
Our carrier services has recently been awarded at an APAC level with the A2P SMS Monetization of the Year Award India at Asian Telecom Awards 2023. At CIO Choice 2023, Vi Business has been chosen as the preferred partner of choice for Citron Telecom Carrier , managed mobility services, cloud telephony and Telecom Carrier International access on the basis of an extensive pan-India CIO referral voting process that spans across industry verticals. At the Voice and Data Awards 2023, Vi Business has been recognized for innovation and excellence in customer service and for Vi Business Hub.
The next strategic initiative is driving partnerships and digital revenue streams. We have such a strong digital road map for the company and have been executing the same through strategic partnerships in our continuing journey of being a truly integrated digital services provider. Over the last 5 quarters, we have significantly expanded our digital portfolio with the addition of music, videos, gaming, jobs, education, and digital advertising, and we continue to add various features to our offering. And we are primarily building most of it on our Vi app, which saw around 30% year-on-year growth in MAUs in the last year.
We have seen a strong growth on each of the digital services during the year. Our digital engagement on these telco cross proposition has almost doubled through this past one year. This is being led mainly by the movies and MCV and music, both of which have shown strong growth on our platforms in the last quarter and the full year. Music years as of the end of year saw 63% growth year-on-year. Similarly, Vi Movies and TV showed a 32% growth in monthly active users versus exit FY '22. This, of course, is on the back of various curated content and events we keep creating for our users.
On the video front, our strategy has been to provide curated premium content to our consumers. We continue to build partnerships with content producers to be able to deliver an enriching experience to our users. We have added new partners in the past quarter to build our content depository. Through our partnerships, we've now only offered premium entertainment content to our users, also for the first time, we offered LiveT20 International Cricket on Vi App to our users on the back of our partnership with Vi. We have seen highest growth on our video consumers in the past quarter.
One of our endeavor on digital is to read the emerging trends and build relevant propositions to be able to drive meaningful engagement and create opportunities for better monetization. Snackable content as you all know, has been in used demand, which is shorts or reels that consumers can consume on the go in a very little time. We have recently launched a new channel BYTES on Vi App in partnership with NDTV to provide quick bytes of trending news and stories across sports, films and lifestyle.
As you will be aware, we have enhanced our gaming proposition for the launch of multiplayer games. On that front also, we continue to see strong growth. Expanding our gaming portfolio, we also introduced eSports on Vi App in partnership with one of the leading esports startup, GamerJi. With the objective of democratizing esports, we offer daily tournaments to our esports fans across some of the market titles like Call of Duty Mobile, Asphalt 9, Free Fire Max, WCC 3 and more. While we continue to build new propositions for our consumers across various digital categories, we have also worked a lot on enhancing the digital experience of our consumers on our digital assets.
This reflects in the fact that our app ratings have improved significantly in the last 1 year, while Vi App have moved up from 3.9% to 4.3% on Google Play store, Vi MTV moved from 3.7% to 4.1%. Our app's rating is now amongst the best in the industry. Our endeavor is to consistently enhance this and deliver superlative experience to our consumers. We had also talked about the launch of Vi Ads, our own adtech platform, which is one of our key monetization drivers. Vi Ads is helping us drive the monetization of our digital assets as we continue to scale our footprint and are now able to drive good demand. Vi Ads is now empanelled with almost all of the key media agencies in the country, and we are part of the media plan for some of the big brands in the country.
We worked with over 35 top brands in the past 2 quarters. While we continue to drive demand from the large agencies and the big brands, our focus in the coming year is going to be on building a strong go-to-market for the small and medium businesses. We will continue to have a disproportionate focus to build a digital ecosystem with our partners, enabling a differentiated experience for the users, which will help us to drive customer stickiness as well as provide incremental monetization of
opportunity.
Moving on to other highlights. On an annual basis, FY '23 is the first year of annual revenue growth post merger clearly reflecting our ability to drive operational excellence despite various challenges we have faced. More importantly, our EBITDA of INR 83 billion and EBITDA margin at 19.7%, were also the highest since merger, and our annual EBITDA registered a growth of 24.1%. We continue to register improving 4G subscriber base for the second quarter in a row with 1.1 million 4G subscribers added in Q4.
The 4G base now stands at 122.6 million. However, the overall subscriber base declined to 225.9 million versus 228.6 million in Q3 FY '23. We registered the second quarter of average duly revenue growth despite subscriber loss. The overall average daily data volumes for the quarter were up by 2.9% quarter-on-quarter while on a year-on-year basis, the growth was [ 10.8% ]. We continue to see the increase in the data usage for broadband customer, which now stands at 15.1 GB per month. We have also seen an increase in voice minutes per sub by 1.6% quarter-on-quarter.
With that, I hand over to Murthy, who will share the final highlights for the quarter.
Thank you, Akshaya. A warm welcome to each of you. On the quarterly performance, the average daily revenue for the quarter improved by 1.4% compared to the last quarter. Though the seventh consecutive quarter where we have registered growth in daily -- in average daily revenue and for the subscribers. Revenue for the quarter stood at INR 105.3 billion. EBITDA excluding 116 impact was up by 3.3% quarter-on-quarter at INR 20.7 billion as compared to INR 20 billion in quarter 3 FY '23. This is primarily due to lower network expenses, partially offset by increase in roaming and access charges.
As highlighted by Akshaya, the annual revenue improved for the first time since merger and grew by 9.5% from INR 385.2 billion in FY '22 to INR 421.8 billion in FY '23 supported by tariff hikes, including subscriber mix and 4G subscriber additions. Resultantly, the pre IndAS116 EBITDA for the year increased from INR 66.8 billion to INR 83 billion registering a strong growth of 24.1% and the EBITDA margin of 19.7%. Both EBITDA and EBITDA margin are the highest since merger. Excluding the impact of IndAS116, the depreciation and amortization expenses and net finance cost for the quarter stand at INR 42.4 billion and INR 40.2 billion, respectively. The reported post IndAS116 depreciation and amortisation expenses and finance costs for the quarter stands at INR 57 billion and INR 49.1 billion, respectively.
The CapEx spend for the quarter stands at INR 5.6 billion, taking the CapEx spend for the entire year to INR 33.6 billion. Following the conversion of the loans related to the interest of -- on deferred spectrum installments and AGR dues into equity amounting to INR 161.33 billion to Government of India. The total gross debt, excluding lease liabilities and including interest accrued and not due on the 31st March 2023 stands at INR 2,092.6 billion versus INR 2,228.9 billion as of 31st December '22. This comprised of deferred spectrum obligation of INR 1,307.1 billion and AGR liability of INR 655.5 billion that are due to the government. Debt from the banks and financial institutions of INR 113.9 billion and OCDs amounting to INR 16.1 billion.
With this, I hand over the call to Nirav and open the floor for questions.
[Operator Instructions] The first question is from the line of Sanjesh Jain from ICICI Securities.
A few. First, on the ARPU, Sequentially, the drop is much lower than the number of days which has declined. Can you help us understand what is pricing like-to-like ARPU growth because the 4G addition is still quite muted for us...
Your voice is not coming clearly.
Is it good now?
Yes.
Okay. Sorry. So what is driving the ARPU improvement for us beyond this 2G to 4G addition?
So Sanjesh, I think ARPU is a result of multiple factors. One is that we have been focusing on quality and on renewal rates. So as you get better quality of customers, the gap between the expiry and the renewal improves, that is also a major factor which improves the ARPU.
So that is something which we have been focused on both the quality of our customer acquisitions outside alluded in the last call also and also how to kind of improve the renewal rate. So several interventions have been done in that direction.
Of course, as we have mentioned that our 4G subscribers and dual subscribers have also increased quarter-on-quarter, and that also helps the ARPU story. And in this quarter -- so I would say these are the main factors which have benefited us on the ARPU front.
Got it. Second, on the voice minutes, probably post merger is the first quarter where the sequentially voice minutes have grown, are we benefiting from Airtel increasing the minimum recharge from 99 to 155.
2 set of questions. Are we benefiting from Airtel taking the minimum recharge to a higher level. And number two, what's our thought process in terms of realigning the minimum recharge to a higher rate.
I would say that with the point you are making that why is the voice minutes going up, I think it has also got something to do with the number of U.S. subscribers going up. I think in the past for some time, we were kind of flat or declining. And for the last 2 quarters, we have seen an increase in the number of U.S. subscribers. So that is kind of also helping the voice minute.
I don't think Airtel's action would have impacted our churn a little bit, but it would not have impacted the increase in voice usage per sub really. In fact, if you look at the -- if you are looking for people migrating from 99 to 99 plan, actually, it should, on a weighted average bring down the number of minutes of use per subscriber. So that cannot result in the increase in the usage per sub...
No, I was looking at more of a total usage of revenue. But I fairly understand.
I mean I think the more important metric to look at is what is happening to per sub assumption, and that is increasing. You can see a significant improvement in the last 2 quarters, which is largely supported by, as I said, I mean, the factors for this are the same as the ARPU that you're getting more UL subs, you're getting better renewal rates and if you get better renewal rates, then the usage is also high.
Got it. And our -- any plan or thought process on realigning the minimum recharge.
Can you be a little more specific?
So are we planning to also increase the prices on the minimum recharge from the existing level to 155?
So it's like this, let me just explain this in some detail. So one is we have always stated that the tariffs in the industry need to go up. That goes without saying. The current tariffs are definitely not giving the adequate return on capital to anyone in the industry. So they need to go up.
Within that construct, and I don't know, maybe you've noticed that in Mumbai, 2 days back, we have changed the entry level pricing to some extent by reducing the benefits on the 99 products. So the 99 product, which was earlier on a 28 days validity, the validity on that has been brought down to 15 days. So that price intervention has been done in Mumbai. We will continue to observe the space and make interventions as we go forward.
The next set of question is on the CapEx. This quarter CapEx looked quite lower than what we have been doing historically. How should we see CapEx, say, for FY '24 as we go for the next year?
So I think CapEx, as we have said in the past, that currently the CapEx that we are incurring is more of a minimum sustenance CapEx and any meaningful improvement in CapEx, which we have a plan, we have a business plan, we are in discussion with the banks and other sources of funding. But the CapEx guidance, we will be able to give once the funding is in place, but definitely, we have plans to ramp up the CapEx mainly to bridge the 4G coverage gap because we believe, I mean if I were to tell you today and you have been kind of mentioning this over the last several quarters that today, we have the best 4G speeds on our network wherever we are present.
We have the best voice quality as reported by trial. As I alluded to in my opening remarks, we also have the best ratings on our app. We also are currently acquiring customers with the share of customer acquisitions being higher than our current customer market share. So really speaking, you look at anything which matters in the market is going right for us.
The only place where we are losing out this on loss of customers, which we are not able to address, which is a result of the fact that our 4G coverage is limited, and we have not been making the required investments for last 1, 1.5 years. So the investments will be made and that will start making a meaningful difference to our operations.
But as I said, other than the loss of subscribers, if you look at any of the metrics, which are explained, we are doing very well. And we are confident that with the investment coming on, we'll be able to make significant improvements to our performance.
Fair enough. One last bookkeeping question. In this quarter, finance cost has dipped very sharply. Does this also have a retrospective impact on the finance cost, where we have booked the cost for the previous 9 months, and now that the government has converted interest into equity.
So it's a balancing figure in Q4, so it's a cumulative impact of the entire year. Is that what seeing in the Q4 number? And what will be the steady state finance cost for us?
So Sanjesh, in that, you are right. Given that we continue to accrue interest until the time to order, therefore, that amount was written back. And from the stage ship perspective, what was written back if you're not to consider, then going forward, you have that kind of interest cost impact on a quarterly basis.
So can you give us in this quarter, what was the benefit of retrospective reversal of the interest cost?
About INR 1,300 crores...
And generally speaking, Sanjesh, I think, going forward on a steady state without any FX impacts and one-offs, we would expect to have financing cost, which is in the ballpark of INR 5,300 crores to INR 5,400 crores in a quarter.
Next question is from the run of Balaji Das from Credit Suisse.
So my question is -- I have basically 2 questions. like it's a hot topic, actually. Maybe I still remember, I think it's almost 1 year. And I remember the performance, you were mentioning about the funding we are so near, and that's all other things. But still the same story.
Like my entire family is using Vi, everybody is interesting on the 5G market and et cetera. So where exactly are we? And are we having any option of promoter putting in funds? Or it just the banks? Or is something, there a lot of rumors in there actually.
And we've never seen management speaking any single thing on that. So can you just give a small idea on what that exactly are we in terms of 5G and the
Okay. Balaji, let me just respond to your question as much as I can, of course, some of these are topics which I cannot disclose. But let's say -- and you're right that this topic of funding has been discussed for a fairly long period of time.
As you would recall that the funding discussions are on and anybody who is wanting to provide funding to the company, whether it is debt or equity, I wanted to make sure that the reforms package was implemented in total. And the conversion of shares or issue of shares to the government got delayed. And that was the primary reason why we could not make any progress on that front.
Now the government conversion has happened in February and post that since all the reform -- most of the items on the reform package were implemented. Mr. Birla has also rejoined the Board in April. I would say post the government conversion and these events, we have been actively engaged with the banks and the banks we have been engaged in the past also. Promoters have contributed equity in the past, and they are also ready to contribute some more equity. The third leg of funding has to come from external investors to bring in equity.
And that discussion, I would say, currently, multiple discussions are on, and these discussions have become actively in the last 1 month or so post the government conversion. We are progressing well on these at least 3 discussions which are going on. And we expect to make progress on this and conclude funding. So we are moving in the right direction. I would say that the implementation of the reforms package was a prerequisite for any conclusion to happen. That having happened, we are now trying to work towards getting this to a closure.
Okay. So just a supporting points the same thing like we got this spectrum allocation, 5G spectrum allocation last year, August. So we have an obligation to deploy at least in the minimum, which is by August. So do we have a target by we can plan and like -- so how are you looking at that particularly?
So I think MRO is more a compliance requirement, and we'll work on that. But I think your requirement, as you said, the entire family is asking for 5G connection, so you are not focused on the MRO compliance, but we're looking for a wider coverage. As you can say that our CapEx and any 5G will be dependent on new funding.
The plans that we have shared with the banks and investors include 5G investments and a good amount of 5G coverage. So definitely, 5G is a part of our plan, and we'll be executing and implementing that immediately once the funding is in place. You will have a 5G connectivity once we start investing.
Okay. And just the last point on this, like we had a recent statement from DOT Chairman like we are expecting a renewable plan within one month, so how -- maybe you can provide more clarity like how is the communication with DOT going on? And is there any discussions on an advanced stage on the revival plan, which the DOT is expecting from management?
No, no. So I think we always remain continuously engaged with DOT. DOT is the largest stakeholder in our company today from all points of view. So we are constantly engaged with them. We are updating them on a regular basis.
As I mentioned that currently the most important thing is to -- I mean, let's say, there are 2 things. One is the most important thing is that we focus on our operations and the operations continue efficiently. And I think I've alluded in my opening remarks and the response to Sanjesh's question that we are actually operating efficiently and getting the right KPIs progression as far as operations are concerned.
But as we said that for any meaningful improvement to happen in the performance investment is necessary, and that remains a focus area for us, so we are working on that and DOT is constantly updated on whatever actions we are taking to make that up.
Next question is from the line of Vivekanand from Ambit Capital.
I can see that your sales and marketing spend as well as churn seem to have moderated compared to where it was, say, in second quarter and third quarter.
So Akshaya, I would appreciate your comments on the on-ground aggression with respect to rotational churn and also the 3 players, how they are behaving in the industry right now as far as customer acquisition costs are concerned. So that is question one.
The second question is now that the tariff environment has been stable for a while, last RFI was taken in December. How are we thinking about the tariff outlook for the next 6 to 9 months? Are there any considerations like potentially inflation subsiding or anything that the industry is waiting to really take the next step in increasing tariffs?
Okay. So to your first question on the sales and distribution spend, so it is right that -- and I think I had alluded to this in my last call also that we have taken a number of interventions to reduce the -- I would not say, reduce the aggression, and I would just try to differentiate between 2 things.
And I think we've also seen that other players have also kind of been trying to see. I mean, at some level, if you see the industry is spending anywhere between INR 12,000 to INR 14,000 crores per year towards customer acquisition costs, and what you see as a net addition to the industry is very little. So it is very clear that there's a lot of expense being incurred, which is just supporting rotational churn. So that needs to be addressed. That goes without saying.
So what we have been doing is that we have been looking and we have done lots of analysis, lots of detailing, to see where are these coming from? And what are the cohorts which by acquiring we are actually not on a long-term basis, they are value destructive for us. So they are giving us negative cash if you do an analysis over a 6-month or a 12-month period. So we have taken actions to stop doing business with partners who are contributing to loss rather than adding value to us. So while we continue to be aggressive in the market, we are taking very conscious and deliberate actions to eliminate acquisitions as a cohort. We can't do it at an individual level, but cohorts, which are loss-making for us, we are eliminating that.
We have also taken some interventions to see that the incentives being paid to the channel partners and all are done on a more realistic basis. Sometimes there is a bit of overexuberance in incentivizing the channel and we are saying that what is reasonable needs to be done. We are also kind of looked at rotational churn, within the MMP segment also. And we found that, generally, it was believed that potential churn is in the fresh segment in MMP, there is not so much rotation. But as things have happened, not developed over the years, and particularly in the last 1 year, we have also observed a lot of rotational churn happening in the MMP segment. And we've also kind of identified that and taken action so that those kind of acquisitions are not incentivized. You kind of reduce the incentive, which is being paid for subscribers who are habitual rotational churn.
So I would say many initiatives have been taken. We also see some initiatives being taken by some competition. And I do believe that the industry needs to move in a direction where we compete to acquiring customers on merit and not through the high cost group. So we continue to work in that direction. Did I answer your first question completely?
Yes, this is very, very helpful.
Can you just repeat your second question? Sorry, followup on tariff.
Tariff side, are there any considerations that perhaps the industry is looking for, like perhaps inflation moderating or perhaps smartphone prices coming down to take the next steps as far as tariff hikes are concerned, given that the last hike is now fully in the base.
Okay. I don't think it has to do anything with smartphone prices, and I cannot speak for the industry, but I can speak for us. I think let me just get to first main -- I think in points of principle I said that the tariffs need to go up. And I think as I had also mentioned in the last earnings call, if you look at any -- I mean, telecom is today an essential services and probably the cheapest price essential service, which actually brings you the maximum benefit.
If you look at electricity, for example, there is a base charge because whether somebody is using it or not, the service provider incurs a cost of providing infrastructure to the customer. And so there has to be a minimum charge for availing the service, whether you actually use it or not. And I think that is the basic concept of the entry-level pricing as to that should be determined in that fashion. More importantly, the construct of the industry has been fairly distorted. And I do believe that the biggest factor, which has impacted the right ARPUs in the industry is this a trend of daily limit 1 GB per day or 1.5 GB per day.
So whether you use 5 GB in a month or you use 28 GB in a month, you pay the same, which does not happen in any industry and as I said, essential services like electricity is a very good example or you take gas supply, anything of that nature. So we need to move in a direction where there is a fixed charge for availing the connection and then you pay based on usage, usage will, of course, be telescopic pricing. So we constructively need to move in that direction as an industry.
In terms of our position, I think you are aware that we have lost certain subscribers because of lack of 4G coverage primarily at this point of time. And so we are watching this space. We would be happy to follow any tariff improvement actions by the market leaders because we do believe that the tariffs need to go up. I think at this point of time, we will not be able to take the lead on that.
However, as we get to -- back to the investment mode, and we are able to expand our 4G coverage, we could also take the lead. But it goes without saying that there is an essential need to get the tariffs to reflect the cost that the industry is in.
This is helpful. Can I slip in one last question on CapEx. So I understand that you are now only doing CapEx that is bare minimum or just necessary to do right? But what we are seeing is that with your CapEx on an annual basis is much lower. I mean, it has been declining every year for the last 4 years since merger. But now your subscriber numbers, your revenue trends seem to be fairly healthy.
So how should we interpret this -- I mean on the 1 hand, your CapEx is declining continuously. And on the other hand, we are seeing that your subscribers are now stable almost or only marginally declining and revenue trends also seem to be fairly healthy even if we compare it with peers.
So thanks for recognizing that. I think yes, I would describe it is that as long as the traffic growth is there at existing locations, the major part of CapEx comes when you have to expand coverage. The way the pricing models in the industry has evolved that you deploy more capacity on the same side, the cost is not very much.
Most of the time you are just buying additional licenses, the hardware is already paid for. So really speaking, even in that minimal CapEx that we have been incurring, we've been constantly increasing our capacity, and that is clearly reflected that as our traffic has gone we still continue to have the best 4G download speeds in the industry wherever we are operating. So we have been doing -- when I say what we are incurring the minimal CapEx, we are ensuring that our customer experience, wherever we are operating is not impacted. What we have not been able to do is expand our coverage or invest in 5G, which are the 2 main things, which will need to be addressed by the new funding.
Next question is from the line of Kunal Vora from BNP Pariba.
My first question was on the 5G, so what's the device penetration amongst your subscribers? And are you seeing any increase in churn amongst 5G customers? And have you done any survey on the customer expectations regarding 5G and how do they see not having -- you're not having 5G, and your thoughts over the next 1 year, how do we see this impact?
Thanks, Kunal. So I think the 5G devices on our network are in the ballpark of about 8%. In terms of customer -- I mean until now, has there been any impact in terms of churn, we've not seen any change in the trends. And in fact, this quarter, you would have seen a reduction in our overall churn.
So definitely, this is the latest quarter where large investments have been made by competition in 5G, so it has not impacted our churn. So definitely, at this point of time, it is not impacting our churn levels. Currently also, there are multiple challenges in use of 5G as you are mostly aware that there is an issue with battery. Now of course, the thing is the earlier challenge was that consumption went up. But anyway, now competition is giving 5G data for free, which again has been, I mean, good for the consumer. But definitely, as has been mentioned that competition wise, this is not sustainable. Ultimately, 5G data will have to be charged. And if that starts getting charged with challenges that what is the benefit you get in terms of experience versus what is the additional data being consumed because as is the case generally speaking, for using 5G on your handheld device, we will not see a perceptible difference for the same application.
Let's say video is the highest consuming -- highest data consuming application. Now even whether your speed many parts, but you will both video at the same speed. So that experience cannot change. Of course, there will be if you measure the speed, you'll find the difference and an experience. But generally, you will not find a difference in experience or a discernible differential in experience. So I think from an experience perspective, it is not going to make a significant difference, and there are currently leasing issues with 5G introduction.
So I think these are a matter of time, these will go away. I guess we will need to invest in 5G because anybody who has a 5G when 5G networks stabilize, they would want to having -- whether they use it or not, customers would want to have the option of having 5G. And so I think it is not having any impact today, and I don't see it having an impact in the next few months.
But definitely, if you look at over a longer period of time, everybody needs to have a 5G offering. Now what should be the depth and breadth of that coverage is something which will have to be iteratively determined over a period of time. But needless to say, we are working on having a 5G offering as and when a funding is tied up.
And as and when you get funding, what will be the priority? Would you look to expand 4G coverage or would you start investing in 5G?
Both together.
Okay. My second question is on bank borrowings. It's down almost by INR 6,700 crores last 1 year. So how has been the experience dealing with banks at least the expectation wise, was that after the release of bank guarantees, we should be able to get a roll forward of loans, but that does not seem to be happening here now? And also, how much is due in the next 12 months?
So I think we have never been talking about the roll forward of the loans, so all that we have been discussing with the banks is new facility for CapEx for investments. So we continue to pay all our debt as it falls due. And that is what we have been doing.
Now as I said that the bank funding, which I explained in detail earlier was not progressing because of the government conversion has not happened. Post that discussions have been initiated, there is a certain linkage between the equity being tied up and the bank that being tied up. And that work is on. As I said, we've made a lot of progress in the last 1 month following the conversion, and we are progressing in the right direction as far as that is concerned.
Our debt servicing in FY '24 is about the same level as we had in the last year in the ballpark of about INR 8,000 crores for the full year. So it's not different from what we had last year.
But total borrowing, if I remember the number right, it is about INR 11,000 crores. So that is, I'm talking about the actual borrowings. So of that, INR 8,000 crores will be paid out within FY '24, is it...
That's right.
Okay. So after that, like given you are able to make a payment, then after that actual borrowing will be almost negligible.
So actually, if you really look at it today, and we have kind of had some accumulation of ended deals because we have had to prioritize the debt servicing. But as you think that servicing is less to almost [ 11,000 ] for the banks, our EBITDA is in the ballpark of [ 8,000 ]. So in some ways, it is a single turn. And once we are out of that period and the debt servicing burden starts reducing, then we will be able to use the generation from operations to
address the vendor deals.
And lastly, on the postpaid side, are you seeing your large customers being approached by competition or you've seen some new plans getting rolled out on postpaid. Have you seen any impact in the postpaid market?
So I would say, I think as far as what is happening on the competition front, it is business as usual. Of course, of there has been this aggression in the family pricing. And so family or no family, you can get into a family plan. And that has brought some aggression into the postpaid plan, then the postpaid pricing. So I would say that has been the only deviation on the postpaid.
Otherwise, I think it is a business which is doing well, and we are also kind of doing -- I mean, postpaid is a focus area for us. We have done some changes within the structure in which we run the postpaid business, and I expect to see a better performance in FY '24 on the postpaid.
Is the postpaid ARPU stable?
Yes, ARPUs are generally stable. I mean, as I said, there is some dilution happening on account of these family plans, which have come in, and we'll just have to kind of be a little cautious about these that are coming a way to discount the postpaid pricing, but let's say, it is early days, we'll have to see how it works. But until now, we have not seen any dilution on the postpaid offers.
Next question is from the line of Aditya Suresh from Macquarie.
I have one question to Mr. Birla joining the Board. I just want to understand, has there any change in your priorities since he's resumed? And I guess the other kind of related piece is that in terms of a balance between kind of spending and marketing and standing compared to, say, spending or payments to power companies, how do you kind of balance those needs?
Sorry, Aditya, your last part, the audio was not very clear. If you're on a speaker phone, can you get off the speaker phone and repeat your question.
Sure. The last, it was simply about in terms of balancing your spend between marketing versus the payments to tower companies and your other suppliers and also in view of your comments around kind of having operational stability. How do you balance these different requirements in balance sheet?
So I think on your question of any change in priorities after Mr. Birla has joined the Board, so let me assure you though even while Mr. Birla was not on the board, he has been actively engaged and involved in the affairs of the company as he was -- when he was on the board. So his level of engagement has not been impacted, whether he has been on the board or not been on the board. So to that extent, our priorities and focus on doing whatever needs to be done to get the funding and get back to investment remains the same. So that is not impacted by Mr. Birla joining the Board. But of course, his coming back on the Board gives a lot of confidence in our discussion with the investors and bankers. And this will definitely be helpful enough on the trying funding trial. On the second question, on your prioritizing of -- currently, if you will see, we are largely paying all our OpEx payments, what we are not able to encourage the CapEx payments. So I think that is where we are operating now within that overall structure, we kind of prioritize our payments to -- which are in the best interest of our operations. I don't think we have to kind of do a trade-off between whether I pay the tower company or marketing spend. I think it is all in the normal course of business. So I think managing operations, we are doing well. We basically need to get funding for the purpose of making investments. That is the most important thing.
Next question is from the line of Sourav Handa from Citigroup.
I have 2 questions. The first 1 was on network OpEx. What was the reason behind the sequential decline? And is this a sustainable rate going forward? That was the first.
The second was on trade payables. So that number has been coming down for the last couple of quarters. So again, sort of just to reiterate what you were saying earlier, do we assume that you have been prioritizing when the payments to some extent and which is why the CapEx has also declined for the last couple of quarters.
So let Murthy reply to the network OpEx question. I think on the trade payable, this quarter, it is appearing as less because in some the ATC payables have been converted to an OCD structure which was a transaction of about INR 1,600 crores.
So I think this quarter, the payables reduction is largely coming from that. Otherwise, as we are saying that we kind of are remaining flat on our payables. They are neither reducing, nor increasing. They are largely flat because CapEx is kept at the minimum and OpEx is largely being paid in full. There could be some timing variations here or there, but that is largely the way we are operating. I'll request Murthy to get the details on the network OpEx.
Some of the network OpEx is largely due to 2 days less than Q4 versus Q3 and also the seasonality effect of the quarter. At the same time, they have alluded to earlier, there have been a few write-backs which have happened. And accordingly, that's affected the INR 200 crores decline during the 2 quarters.
Okay. So this number should go back up maybe to last quarter's levels in Q1.
May not obviously, the seasonality effect will obviously go where the summer sets in. And of course, if you're able to -- I mean, do better, then in that case, it may not really have that impact back. But yes, if the consumption is higher and there is inflationary effect, then that is possible that the number will go up.
There, you're broadly right that the current quarter because of -- I mean Q3 would be a more represented figures for assessing what would Q1 be like.
Next question is from the line of Hemang Khanna from Nomura.
I have a couple. So in this quarter, we saw probably the lower subscriber decline over the past 6 quarters, could you just share some color how April and May have also band out? And the second is on the dues and payables. You mentioned about INR 80 billion 25, 26.
Hemang, I'm sorry to interrupt you, we are losing your audio. Can you come in a better reception area, please?
I think you will have to repeat the entire question, please.
So the first part was on the subscriber loss. This quarter saw the lowest rate in probably the last 6 quarters that we've seen. Could you just help us understand how April and May have also band out. And secondly, on dues and payables. So for FY '24, you mentioned about INR 80 billion is the total payables. Could you help us with FY '25, FY '26, how do those payables look?
Okay. I think as far as the subscriber indicators for April and May are concerned, I will not be able to give you any guidance right now. So I think that you'll have to wait for the results to be announced. The other question you were asking is relating to --
I think basically, what we said is that our outstanding at the end of this is about INR 11,500 crores. We have about INR 8,000 crores, which is due in the next quarter. So what would be less than is a very small part of debt which is INR 3,500 crores of main debt left, which will be paid in FY '25, '26, I don't have the exact breakup. But ultimately, at that point of time, the debt servicing becomes very small.
Thank you very much. I now hand the conference over to Mr. Akshaya Moondra for closing comments.
Thank you, Nirav. FY '23 has come to an end, and there are many positive takeaways as we move to next year. As highlighted in my opening remarks, FY '23 is the first year. where we have registered annual revenue growth post merger despite various challenges we face, clearly reflecting our ability to effectively operate and compete in this market.
Further, our EBITDA for the year has registered strong growth of 24% with highest post-merger EBITDA margin at 19.7%. We have reported 7 quarters of sequential growth in several key metrics, including ARPU and 4G subscribers. In fact, our year-on-year ARPU growth of 9.3% is the highest amongst wireless operators. All of this is possible only because we are focused on providing great data and voice experience and are building a differentiated digital experience, adding several digital offerings in the recent months.
We have issued equity shares to the government consequent to conversion of the interest related to deployment of the AGR and spectrum dues. We continue to engage with lenders for further debt fundraising as well as with other parties for equity or equity-linked fundraising to make required investments for network expansion and 5G rollout to arrest our loss of subscribers.
We have had the best 4G speed, best voice quality, best app rating and our customer acquisition share is higher than our current CMS. Riding on this foundation, we have been improving our performance in the last 7 quarters with limited investments and we are confident that with the investments coming on stream, we will be able to make more meaningful improvements in our overall performance.
Thank you all for joining this call. Have a good day and a good weekend ahead of you. Thank you.
Thank you very much. On behalf of Vodafone Idea Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.