Sunil Sood has become the Chief Executive officer of Vodafone India at a time when the company is at the cusp of charting out its next phase of growth. The competition in the sector is set to hot up with the entry of Reliance Jio next year, and there are several regulatory challenges that Vodafone has to steer through. Amid this, the company has also started preparing for an IPO. For Sood, an old timer at Vodafone, the elevation to the top job in April is an endorsement of his ability to steer through clutter and focus on business. In a conversation with BusinessLine, Sood outlines his plans for the second largest telecom operator in the country.
Are you seeing OTT (over the top) players eating into your revenues?
Not yet. Overall, they are generating a lot of revenues for us. The operators are helping them gain more customers, while for us they are bringing in revenues. It is affecting some of our voice business, far more in the international long distance telephony business than the domestic business.
Should people be allowed sampling to enable usage? Yes, we do it all the time. We give free data, free SMS, voice to enable users try them out and upgrade. It’s a win-win situation for all. For us it’s not so critically important for us to have Free Basics, and not unimportant that I need not participate.
It helps me to increase my data business, and provide the users what they need. There are various ways we can play this game. For example, I can give you 50 MB free or Facebook free. Let the regulator decide what’s right and what’s wrong, we will abide by that rules. For us it’s not do or die situation.
Are the voice revenues flattening?
Our growth this year in voice has been higher than that in the previous year. In general, our own voice is not flattening, it’s growing in minutes. The overall growth in the industry is slowing down, but gradually. This year we expect a percentage lower than that a year ago. The overall impact on voice is on the revenue side because of the fall in termination charges, so value-wise you would not see much growth. However, the minutes generate by the overall industry are going up.
Organisationally, what are the things you want to do to be ready for data growth?
The big challenge is educating the users. Most people in India are now using data on the mobile. Phones are getting cheaper, and with the Internet boom that is happening, which is making data to move faster, there is a rationale of why people should use data.
What is in it for me? People do not understand that data is different from voice. In the past 20 years of voice service, people only made calls when they wanted to. In data, the game is very different. The user has to pay the moment he gets a WhatsApp message, irrespective of whether he has read it or not. Incoming data is not free, and that requires a massive amount of education for him to understand.
The biggest challenge now is to educate the common man that voice and data are charged differently.
Earlier Vodafone had taken a view that 4G was not important in the near term. Now Vodafone is launching 4G services. What’s changed?
We had articulated last year that 4G was not particularly important. A month back, the overall 4G phones on our network was below 2 per cent, whereas 3G phones were about 26-27 per cent. There are a couple of barriers for entry of 4G.
One, you have to change your SIM card. Two, you have to change your phone, because now only two per cent of our base has it. Everybody doesn’t want to change the phone as there is a financial outgo. Plus the whole eco-system is still evolving. Even today, 74 per cent of the market does not have a smartphone.
Is 4G going to be a metro play?
It’s going to be a metro play. That’s why I am launching it in the metros. The probability of users upgrading is higher in the metros as they have been already using data. That’s why we are launching it selectively and not nationally.
Where do you see Vodafone next year?
We want Vodafone to be the most advocated brand, the most promoted company among all our customers. That’s the picture we want to achieve as a company and as a brand.
You are not chasing No. 1 ranking?
I think that’s the secondary effect. That will happen automatically if you achieve these goals.
If you are the best brand, if you are the most advocated brand, and has the most net promoter score by consumer base, then you have achieve it.
What are your plans on the IPO?
We are preparing and getting ready for an IPO, and if we see the market is right and our board gives us the go ahead, we would like to do one.
It requires a lot of preparation, at least a year to year-and-a-half. It’s very early stages.
How do you see the spectrum trading and sharing?
We have always said spectrum in India is scarce. There are two viewpoints on how it helps the industry. We always wanted to have far more spectrum assets than we actually have. As an operator, we welcome both trading and sharing, and we also see that some of the smaller guys who are fiscally in massive debt and are fighting for survival also would look at this as a boon to sell some of the assets or share some of the assets and gain some life.
As Vodafone, we are also interested in furthering our asset base and we are also examining options to complement our spectrum asset base for 2G, 3G and 4G.
Are you talking to Tata Tele for spectrum trading?
I am looking at the whole market, and talking to all the players. We are interested in buying some assets and increasing our footprint, either through trading or sharing or even through fresh auctions.
What are the key themes you are driving after you took over as the CEO?
The business is moving from voice to data, new rivals are coming and the auction had just finished in March when I took over. These were the clouds in the horizon at that time. The early days went into utilising what we won in the spectrum auction. We looked at it as an opportunity for modernising some of our equipment and technology. We got new spectrum in seven circles and we would be completely modernising our network in these circles. In a year’s time, we will have a fully modern network, which is far more energy efficient, which is far more technology efficient and has capabilities to move from 3G to 4G. I am doing in one year what others did over four years. So it’s a massive effort.
The other part of the programme is running the existing part of the business, which we had even before the auctions. We already had 3G in nine circles. We had 100 per cent growth in 3G in the previous year, this year again we are seeing 100 per cent growth in 3G. (as on June 2015)
Is there pressure on data pricing?
We are not seeing pressure in that sense. Last year, we had increased the prices to about ₹255 per GB, while in some circles we had gone up to ₹290, but had to roll back due to competitive pressures. The prices have not gone below that of the previous year, however revenue per MB (RPMB) is sliding slightly because we are selling in packages. The average utilisation per 3G customers is now 700 MB. (as on June 2015)
Vodafone has a large BlackBerry base, which is sliding. We used to have plans worth ₹799, ₹899, ₹1,299 and now you can buy a few GBs for ₹500. That also affects RPMB.
From the customer’s point of view, where he sees prices in terms of headlines or packs which they buy, they are very stable. There has been a moderate 4-5 per cent increase, rather than a decrease, in tariffs.
As an organisation are you bringing in any structural changes in Vodafone?
We are focusing far more on segmented offers. First we get the guy on board and then offer our services, and then how do you more out of his pockets? By offering more and more services, conveniences, he tends to use more. It should be beneficial to him also. Therefore, we approach customers in a far more segmented approach than ever before. Now deals are individually customised for the user.
Why is your subscriber addition slowing down, compared with last year? In September you have been pushed to the third position on user addition?
There are time periods and everybody goes through a little cyclical phase. We had large churns, we had put in some quality measures and now we are bouncing back.
During the last two months, our subscriber numbers have risen. Forget comparisons (with competitors), now we have crossed 1.5 million new users a month after a few months. I am back in the game. Going forward, we expect to go higher than this.
It is very important to understand that your customer acquisition money is not going waste. You are getting a bang for your buck.