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Interview with Arvind Bali, CEO, Videocon Telecom Limited

February 24, 2014
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Videocon Telecom Limited (earlier known as Videocon Mobile) was among the six companies whose telecom licences were cancelled by the Supreme Court in 2012. The company lost licences in 21 out of 22 circles of operation. In the November 2012 spectrum auction, the company won back spectrum in the 1800 MHz band for six circles to restart operations. While the company has decided to not participate in the February 2014 spectrum auction, it plans to expand its operations in its existing circles.

In an interview with tele.net, Videocon Telecom’s director and chief executive officer, Arvind Bali, talked about the company’s achievements in the past year and its strategies to compete with its peers…

How has Videocon Telecom performed in the past one year? What were the company’s revenues in 2012-13?

The journey has been both challenging and rewarding. We had to abruptly shut down our business and in such circumstances, a comeback is never easy. However, we achieved a compound annual growth rate (CAGR) of 83 per cent in our subscriber base and 81 per cent in revenues between January 2013 and November 2013 across our four operational circles – Punjab, Haryana, Gujarat and Madhya Pradesh.

We have been among the top three players in the industry, in terms of net subscriber additions, consecutively for the last six months. We retained the leading position in Punjab for the last five months and in Haryana for four of the last five months.

What are the company’s key focus areas?

Being a new entrant in the industry, we have to grow at a rapid pace. Our objective is to ensure that we are the preferred option in the markets we operate in. The company is focusing on customer acquisition, particularly in the high-end customer segment, by offering value-for-money products and a ubiquitous network, and implementing a unique trade engagement programme.

To acquire high-value customers, our strategy is to offer services at tariffs that are 20-25 per cent lower than those prevailing in the market. We have almost doubled our network size since January 2013.

We have also rolled out a trade engagement programme wherein we offer high-value gifts including foreign trips, LED TVs and other consumer durables to our retailers at the time of enrolment. We have also rolled out the third phase of the Sajhedhari Vishwas Bhari programme, following its success and popularity.

What is the company’s capex target for 2013-14? What are the focus areas?

The year is over and now we are in the process of preparing our annual operating plan for 2014-15. We will be able to comment on capex targets for the next year once the plan has been formalised. The key areas of investment for the company will be network expansion and IT infrastructure as we believe that these are the two most important business pillars for any telecom operator.

What has been the response to the data services offered by Videocon Telecom? What initiatives will be taken to drive growth in this segment?

Data services will be the next key growth driver for the industry. Videocon could foresee the opportunity and instead of investing in a conventional 2G network, we invested in a 2.75G EDGE network that offers higher data download speeds than a 2G network, and is comparable to the speeds offered by a 3G network. This will ensure an improved customer experience.

Our data revenues grew at a CAGR of about 250 per cent between January 2013 and November 2013. The data segment now accounts for over 50 per cent of our monthly value-added service revenues.

To further leverage this data opportunity, Videocon Telecom is planning to roll out 4G long term evolution-frequency division duplex services.

What is your view on the recent reduction in 2G data tariffs?

The trend of decreasing 2G tariffs has reversed with industry incumbents increasing their tariffs and raising the bar. Other operators are also undertaking tariff hikes. India offers the lowest mobile tariffs across the world and this rationalisation was bound to take place. That said, Videocon will continue to offer 20-25 per cent lower tariffs than the prevailing industry rates.

What is your view on the merger and acquisition (M&A) guidelines? Is the company considering any M&A deal?

Videocon Telecom is here to stay and that too under its own brand name. We are making regular investments in various aspects of the telecom business, ranging from network infrastructure to branding. With regard to M&As, we would rather be the acquirer than get acquired. We are currently not in any discussion for inorganic growth through M&As; however, only time will decide the company’s future course of action.

What are the reasons for Videocon Telecom’s non-participation in the upcoming spectrum auction?

We were keen to bid for spectrum in the 900 MHz band in the Delhi circle and acquire an additional 2 MHz of spectrum each in the Punjab and Madhya Pradesh circles in the 1800 MHz band. However, after a lot of contemplation, the company has decided to not participate in the next round of spectrum auction.

Delhi is an evolved market and the company is of the view that 4G long term evolution (LTE) roll-out will be a catalyst for making a difference in the market. However, worldwide, the 4G LTE ecosystem in the 900 MHz band is underdeveloped and is evolving. Since the 4G LTE ecosystem in the country is underdeveloped, the cost of deploying a 4G network in the 900 MHz band is very high. In light of this, the company has decided to not bid for spectrum in the 900 MHz band. Going forward, we expect the 4G LTE ecosystem to evolve and accordingly we will review our decision to acquire spectrum in the future.

The company also had plans to bid for an additional 2 MHz of spectrum in the Punjab and Madhya Pradesh circles. In Punjab, 25 out of 92 blocks are not available in Ludhiana and Amritsar, and those are the areas in which Videocon Telecom’s network is highly congested. Therefore, the company would rather set up more sites than acquire spectrum in the Punjab circle. Meanwhile, we are working on a road map to roll out services in the Uttar Pradesh (East), Uttar Pradesh (West) and Bihar circles where the company holds spectrum.

What are some of the operational challenges faced by Videocon Telecom?

The biggest challenge we are facing today is meeting customer expectations. Customers expect our network to be at par with that of the incumbents who have built their networks over a period of 10-15 years. Although we have almost doubled our network coverage since our comeback in January 2013, there is still a long way to go.

Currently, we have a strong and robust network of cell sites, but it is still not comparable to that offered by the top three players, particularly in the rural belt. Meanwhile, huge investments in network expansion can result in issues related to network fill factor and capacity utilisation, which depend on acquiring and managing revenue generating customers.

What are the company’s expectations from 2014 and what are its growth targets for the next five years?

We are targeting a fair revenue market share and customer market share (CMS) across our circles. We have a CMS of about 6 per cent in the eight operator markets of Punjab and Haryana, and are targeting a market share of 12.5 per cent within the next one year.

In Madhya Pradesh and Gujarat, which are 8-10-player markets, we are targeting a CMS of 12.5 per cent and 10 per cent respectively within the next two years. In addition, we are expecting two of our four operational circles to be EBITDA (earnings before interest, taxes, depreciation and amortisation) positive.

In the long term, Videocon Telecom is likely to be one of the most preferred brands and among the top five players in the country’s telecom sector with a pan-Indian presence.

 

 
 
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