Vodafone Idea Limited (IDEA) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. This is Faizan, the moderator for your conference call. Welcome 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, EVP Finance and Accounts of Vodafone Idea Limited, along with other key members of the senior management on this call. I want to thank the management team on behalf of all the participants for taking 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 risks that the company faces. With this, I now hand the conference over to Mr. Akshaya Moondra. Thank you, and over to you, sir.

Thank you, Faizan. A warm welcome to all participants to this earnings call. Our Board of Directors adopted the unaudited results for the second quarter of FY '23. All the results related documents are available on the website, and I hope you had a chance to go through the same. I will start with a briefing on our strategic initiatives and key highlights for the quarter. Post this, I will hand over to Murthy to share details on the company's financial performance. Let me first talk about recently concluded India Mobile Congress wherein the company showcased a wide range of real-world 5G use cases for enterprise as well as retail customers, including use cases which are targeted towards social transformation and benefits. All these use cases are being developed in partnership with leading technology companies and domain leaders. The 5G use cases demonstrated for enterprise include public safety, connected health care with smart ambulance, private networks, Industry 4.0 with IoT powered autonomous guided vehicles. We demonstrated how our future-ready 5G capabilities, combined with artificial intelligence and augmented reality, can act as a catalyst to improve safety of construction workers using the Digital Twin technology. The Honorable Prime Minister of India made the first call on the Vi 5G Live Network at IMC and experienced the Vi 5G digital twin technology to take an immersive tour of under-construction any metro tunnel in Dwarka and also interacted with workers at the construction site. This Digital Twin technology has immense potential at construction sites, smart manufacturing, crucial remote sites such as oil and gas wells, mining or similar situations in remote high terrain and difficult environmental conditions. With our focus on empowering businesses to grow and reinvent in a dynamic digital ecosystem, we are also working with partners and customers to build private network solutions to drive Industry 4.0 for real-world deployments. And I'm pleased we successfully demonstrated how private network and improve operational efficiency meet growing connectivity requirements at large facilities and provide secure and seamless coverage for devices through a dedicated network. We also showcased other digital and futuristic use cases like cloud telephony solutions, unified communications as a service, and smart mobility with electric vehicles. These solutions have widespread applications and usage across many industries in both large and small enterprises. On consumer use cases, we showcased a preview of an industry-first cloud gaming experience to our customers. Our demonstrations also included use cases for many social transformation initiatives like SmartAgri, which is a revolutionary deployment for agriculture sector using IoT centers sensors, cloud and artificial intelligence to provide precise real-time and localized farm advisories to small and marginal farmers and enhance their livelihood. Our endeavor to support digital education in the country continues with Gurushala, which is a cloud-based collaborative knowledge exchange platform for teachers and students. To drive 5G ecosystem development in the country for faster adoption of services, we have partnered with leading device OEMs to have the Vi 5G provision for its users and chime for market rollout. We are ready for the next journey of growth for 5G technology where a connected world with limitless digital solutions will soon be the new norm, and we'll be playing a vital role in the same. Moving on to update on our strategy pillars. The first priority area for us is to offer superior network experience with 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. This helps us in utilizing our CapEx effectively while ensuring that we continue to offer superior customer experience in these areas. We continue to reform our 3G spectrum to 4G and closed 19,000 3G sites during the quarter. In most cases, we already had one carrier of 2,100 megahertz band deployed towards 5G, and hence, the net 4G site addition is only 8,500. As a result, even though our overall broadband capacity has expanded, the broadband site count stands at 444,228 compared to 454,727 a quarter ago. We have deployed the 4G spectrum we won in the recently concluded spectrum auction, enhancing our 4G network capacity and coverage. Further, we have the advantage of having latest 4G equipment and technologies, which are capable of upgrade to 5G. We continue to offer superior customer experience as reflected our consistent top ranking in several league tables across data and voice. We have the highest rated voice quality in the country as per TRAI MyCall App data for 20 out of 23 months between November 2020 and September 2022. Moving on to the market initiatives. Our unified brand, Vi, celebrated its second anniversary in September by delighting the customers and trade partners through various on-ground as well as digital campaigns. The brand continues to garner a good reception, building brand affinity across all customer segments in the country. We did one of a kind of integration with KBC or Kaun Banega Crorepati, introducing KBC Golden Week with Vi, giving Vi consumers a chance to sit at the coveted hot seat. This initiative offered an exclusive opportunity to Vi customers and created a lot of excitement and stood out as a great example of the differentiated value that the brand brings to the table. In last one year, we have taken several tariff interventions, including entry-level plans. We continue to focus on getting more customers on 4G/unlimited plans for further ARPU improvement even without the tariff increase. We have seen ARPU growth for 5 consecutive quarters now. Q2 FY'23 ARPU stands at INR 131 compared to INR 109 in Q2 FY '22, a growth of 19.5% year-on-year. However, it is important to note that despite the price interventions made in the last 1 year, the tariffs in India continue to remain at unsustainable levels, and we believe that industry needs further tariff corrections to support the continued investment going forward. Moving on to business services. Business Services, our enterprise segment, is one of our strength areas owing to our long-standing relationship with our customers as well as our ability to leverage the learnings from Vodafone Group in various global markets. We continue to make progress in line with our stated strategy of transformation from Telco to TechCo. Our planned expansion of services beyond pure connectivity has seen good traction, and we continue to work with multiple partners to make our offerings more relevant to enterprise customers. Our leading solution, cloud telephony, CPaaS, that is Communications Platform as a Service, is helping various enterprises across industries to automate and digitize customer connect and enhance their customer conversations on 24/7 basis. As enterprises continue to get benefited by cloud telephony solutions, we have further strengthened the adoption of unlimited calling, so that customers can plan their operating expenditure with the various unlimited call offerings, as per their needs and automate business processes through multichannel communication and application integration. On IoT, we continue to maintain our strong position with innovative solutions for large enterprises as well as for small businesses. We are the leader in smart metering as per Frost & Sullivan data for Q1 FY '23. We are currently working with over 25 power distribution companies, powering 2 out of every 3 smart meters in India. We aim to strengthen the government's digital India mission and transform the country's power distribution sector through our IoT solutions. Our partnership with CDOT to collaborate and work jointly to simplify IoT solutions deployment is bringing standardization and interoperability amongst devices and applications as per one end-to-end standard in the country. Our IoT solution is the first to provide end-to-end automotive industry standard 140 compliant solution that includes certified AIS 140 2G and 4G device, dual profile eSIM, IoT connectivity, a management platform and managed services. Our IoT eSIM is also enabling connected cars for one of the largest automobile companies in India, and we continue to witness adoption by others as well. Our strength in the IoT segment has been consistently recognized over the years by our customers, the CIO community, as well as reputed analyst firms, including Frost, IBC, Counterpoint and Berg Insight. On our industry first integrated IoT, we have seen numerous deployments of our smart mobility and smart infrastructure solutions across FMCG, manufacturing and automotive sectors. Our strength in the Smart Mobility segment continues to grow as we are witnessing traction in the automotive and electric vehicle segment. As part of our strategy to transform from a telco to a techco, we continue to build our cloud and security portfolios. 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 security services are serving the growing security needs of enterprises as they embrace digital ways of operations. We continue to support SMEs and MSMEs in digital adoption, transferring their businesses and making them future-ready with our recently launched Ready for Next Program, which helps in assessing the digital needs of the customer and then offering them the right set of solutions. 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 than their postpaid plans. With unique features like data pooling, Vi Business Plus provides superior customer experience with seamless and uninterrupted high speed data. The next strategic initiative is driving partnerships and digital revenue streams. We are aggressively executing our digital strategy through partnerships in our continuing journey of being a truly integrated digital services provider. Over the last several months, we have significantly expanded our digital portfolio with addition of music, gaming, jobs and education, and we continue to add various features to our offering. We have also launched our own ad-tech platform called Vi Ads in the previous quarter, which empowers marketers to engage with Vi users are per their own targeting requirements on both Vi media assets as well as external media channels and publisher partners of Vi Ads. It is going to help us drive the monetization of our digital assets as we aggressively build and scale the same. As you will be aware, the company had launched Vi Games, which provides a variety of individual hyper-casual games in partnership with Nazara Technology, one of the largest gaming companies in India. We further enhanced our gaming proposition with the launch of multiplayer games or what is commonly referred to as social gaming, which enables Vi customers to play various games with their family of friends or compete in daily tournaments with other players on our platform. The uniqueness of our proposition is evident with the depth of engagement, wherein on an average active gameplay time per user is almost 1 hour in a day. While we continue to expand our game catalog within the existing proposition, we will soon be bringing Esports into Vi Games to cater to pro gamers or gen Zs. Esports, as you all know, is a growing phenomenon, especially amongst youth. We will not only enable users to engage in Esports through the range of tournaments on our platform, but also introduce live e-streaming of the Esport tournaments for our users, which again is a fast-growing category. Further, in line with our focus to offer the best entertainment services to our customers and drive deeper engagement through music, we are in the process of launching live events and music concerts in association with our music partner Hungama exclusively for Vi users where Vi users can watch live music concerts by renowned artist on their smartphones. This will be a weekly affair with 52 events in the next 12 months. On the back of all the digital initiatives, we have witnessed considerable growth in our monthly average users on our digital app over the last few months, and we are confident of accelerating this further in the coming quarters as we continue to expand our footprint into the digital ecosystem. Our focus to build a digital ecosystem with our partners, enabling the differentiated experience for Vi users will help us to drive consumer stickiness as well as provide incremental monetization opportunities. Moving on to other highlights for the quarter. We registered the fifth quarter of sequential growth with revenue for the quarter growing 2% quarter-on-quarter, and which now stands at INR 106.1 billion. ARPU improved to INR 131 versus INR 128 in Q1 FY '23. On a year-on basis, ARPU witnessed a strong growth of 19.5%, aided by tariff hikes and subscriber upgrades. The subscriber base declined to 234.4 million. versus 240.4 million in Q1 FY '23. However, the 4G subscriber base continued to grow and with 1.5 million customers added in Q2, 4G base now stands at 120.6 million. The overall data volumes were up 5.4% quarter-on-quarter. We continue to see the increase in the data usage for broadband customers, which now stands at 15 GB per month versus 14.3 GB per month in Q1 FY '23. Moving on to fundraising. As you are aware, between March 2022 to July 2022, the company has raised INR 49.4 billion from promoters. This fund infusion clearly reflects the promoters' commitment to VIL and their belief in long-term prospects of the company. ATC India is one of the largest infrastructure service provider for the company and both entities have a strong long-term relationship. In the spirit of this partnership, we are pleased to announce that ATC India has agreed to subscribe to the optionally convertible debentures amounting to INR 16 billion. These funds will be used to pay certain agreed amount owed to [ ATC ] India under the master lease agreement and to the extent of remainder for general corporate purposes. The issuance of OCDs will be subject to certain conditions precedent, including the approval by VIL shareholders and the conversion of the interest from deferment of adjusted gross revenue and spectrum dues into equity by the Government of India. The engagement, cooperation and support through this transaction reflects ATC India's underlying confidence in the company and its plans. Both parties remain committed to develop a top-quality nationwide 4G and 5G network as well as contribute towards India's digital transformation. We believe that this step will facilitate further capital raise by the company. Let me now talk about the recently released draft Telecom Bill. While we will be sharing our inputs with the government, we would like to laud the government on the new draft telecom bill. Telecom and digital industry is evolving at a rapid pace. The government has recognized this and has proposed a future for telecom law, doing away with the old acts. It is a step in the right direction with simplified rules to guide the sector forward. It also allows government to respond to evolving situations in order to preserve consumer and larger public interest and maintain competition. We look forward to this expeditious implementation of the new telecom law. With that, I hand over to Murthy, who will share the financial highlights for the quarter.

Thank you, Akshaya. A warm welcome to each of you. On the quarterly performance, revenue for the quarter improved by 2% as compared to the last quarter. We have thus registered a sequential growth in revenue for each of the last 5 quarters. EBITDA for the quarter, excluding the IndAS116 impact, improved to INR 21.2 billion compared to INR 21.1 billion in Q1 FY '23, driven primarily by higher revenue and savings in spectrum user charges. These have been offset by higher network expenses primarily due to increasing power and fuel rates and consumption, A&C costs for warranty, the period where the equipment have expired for certain equipments as well as new site rollouts. At the same time, given the higher acquisition costs have also offset these benefits. So while the operational EBITDA has improved, the post IndAS116 EBITDA has declined by INR 2.3 billion as compared to last quarter as the rental changes are accounted below EBITDA. The EBITDA margin improvements as compared to a year back has increased from 16.6% to 20%, clearly reflecting the operational leverage. Excluding the impacts of IndAS116, the depreciation & amortization expenses and the net finance cost for the quarter stands at INR 43.3 billion and INR 51.5 billion, respectively, vis-a-vis INR 56.6 billion and INR 60.3 billion as reported, respectively. As the recent acquired 5G spectrum is yet to be put to use, there is no amortization interest charge to P&L on account of this during the quarter. The CapEx spend through the quarter stands at INR 12.1 billion vis-a-vis INR 8.4 billion in quarter 1 FY '23. The total gross debt, excluding these liabilities and including interest accrued and not due as of 30th September 2022 stands at INR 2,203.2 billion. Out of this, INR 2,052.4 billion due to the government towards deferred spectrum charge obligations of INR 1,366.5 billion and AGR liability of INR 685.9 billion. The debt from the banks and financial institutions stand at INR 150.8 billion. Cash and cash equivalent at INR 1.9 billion as of September end, thus resulting in a net debt of INR 2,201.3 billion. In the last 1 year, the exposure to banks and other financial institutions has been reduced by INR 265 billion on account of debt repayment of INR 93 billion as well as return on bank guarantees worth INR 170 billion in line with the reform package announced by the government. With this, I hand over the call back to Faizan and open the floor to questions.

[Operator Instructions] The first question is from the line of Kunal Vora from BNP Paribas.

And my first question is on the revenue drivers. So you've seen 2% growth this quarter. What's the driver for that? It's mostly upgrading and topups.

So Kunal, thanks for joining. And I think the revenue drivers are primarily, there is a revenue increase in the consumer segment, there's also a revenue increase in the enterprise segment. In the enterprise segment, it's a mix of multiple streams of revenue. In the consumer segment, I would say that there is an increase in ARPU, which is driven by some pricing interventions and some upgrades, which has been partly offset by the decline in subscribers. But all in all, it has been a positive impact on the overall consumer revenue.

And the postpaid changes which you made earlier this week, would that have any impact on ARPU?

I think the postpaid proposition which has been launched was driven more from the point of view of revamping our postpaid offering. And so it would ultimately have an impact on ARPU with attracting more customers to the postpaid segment. However, there is no price intervention of any nature, which is increasing the price for the same offering. But this is basically to make the postpaid more attractive to get more customers on to the postpaid.

Sure. And my second and last question is, if I look at the bank borrowings, it's gone down from INR 23,000 crores to INR 15,000 crores over the last 1 year. And again, that like there has been an increase in lender payables. How do we see this going forward? What will be the priority in terms of cash allocation going forward till the time funding comes through; will it be CapEx, vendor payables, bank repayment, which you can talk about that?

So I think we are currently in discussions of funding with the banks. Definitely, the operational payments take priority and that is what we are trying to do. In terms of CapEx, given the time, we have always said that till the time the funding is in place, any significant CapEx increase is not possible. So I think our priorities are operations, lender payments and then CapEx investment.

But over the last 1 year, I think the priority seems to have been the bank borrowings, which have been repaid. So would the INR 15,000 crore bank borrowings, which you have, will that come down further? Or...

I would put in that there's a schedule of repayment of loans, which we continue to pay on the scheduled date. That we will continue to follow. We are kind of trying to close the funding quickly. so that some of the backlog of vendor payments that we have, that can be addressed.

The next question is from the line of Vijay from ICICI.

My question is about [ funding situation and equity financials ] . Any changes relating that... [Technical Difficulty]

We can't hear you clearly.

Are you able to hear me now?

Little better, but still not great. Please go ahead, let's try.

Okay. Yes. Then my question is about funding situation and equity. We all know that it's going on for a long time. Is there any other end of the tunnel that you see or can you throw some light on that, please.

So I would say that the funding discussions have been going on. This was largely dependent on 2 things. First was the return of the bank guarantees by the DoT, which happened in early April. And post that, the second most important event which needs to be completed is the government conversion into equity. So I would say that the discussions are in an advanced stage, and we should be able to conclude those once the government conversion is in place.

Okay. So the churn of the customers is in a way at this time that we think is in a way dependent on these 2 factors, if I understand it correctly, right?

Sorry, again, I didn't get your question clearly.

The subscriber churn, which has been a continuous flow from quite some time, is some way indirectly dependent on these 2 factors?

Yes. So I would say the subscriber churn may indirectly be related to this, because as we have said, that wherever we are operating our network where we have coverage and presence, we have the best quality network, which is reflected in the external agencies reporting on our data download speeds, on voice quality, the TRAI report, as I mentioned, has rated our network to have the best voice quality in 20 out of the last 23 months and similar external reports on data speeds also corroborate to the same fact. So I think our challenge is not quality of network. On coverage where we do not have a 4G network currently, that is definitely impacting us. And yes, that part of the risk that we run to expand the 4G coverage, that is dependent on the funding. And to that extent, you are right that the churn is getting impacted, because of the funding not being available today.

The next question is from the line of Vivekanand S from AMBIT Capital.

So my 2 questions. First of all, could you talk about the growth across the various segments of your postpaid business, corporate, retail and machine to machine. And if possible, if you could share or give some sense of the contribution to your postpaid base. Secondly, on the network side, I'm just trying to understand, last time Akshaya, we were looking to expand our population coverage, and that was dependent on external fund raising. Is 5G roll out also dependent on external fundraising? And as a bookkeeping question on the network side, how many 3G sites are left to shut down now?

Okay. So your first question is concerning the postpaid analysis. All that I can say is that if we look at this in 3 parts; one is the consumer business, second is the enterprise business. Both have similar trends. They are the dominant segments. Generally some of the what used to be consume the corporate accounts, some of them are also converting to individual accounts. That's a general trend in the industry, but both of them continue to be strong segments for us, the third segment, which you are talking about is the IoT plus M2M segment. That is the one which is actually seeing the best growth. And so I would say that this is a smaller segment today, but this is the one which is showing the most fastest growth. Beyond that, I think we will not be able to share more details on the specific bifurcation of these segments. Your second question was relating to network and the dependence on 4G population coverage expansion on funding and also the same question about 5G rollout. So it is right that both the 4G coverage expansion and the 5G rollout will both depend on the funding. The plan that we have presented for the purpose of arranging funding includes the 5G investment. So both the 4G and 5G rollout expansion coverage, coverage increase and the 5G rollout is dependent on funding. On 3G, I will not be able to give you exact details, but let's say that 3G, we have almost shut down about 50% of our size and the balance are also being closed in a graded manner. This is somewhat dependent on 2 factors. One is that what is the handsets on -- which are on 3G in a given geography. Secondly, it also depends on what is the marginal benefit of getting the capacity. So if you have more than 1 carrier of 2,100 megahertz band, then sometimes it makes more sense and if you have only 1 carrier, it may make less sense. And it also depends on whether your hardware is already enabled on 4G. So those are some of the finer points which have to be considered. But in general, I would say that we are expecting to get out of 3G at the earliest possible. In some circles, we have shut down 3G completely already. So there are some circles where we've exited 3G completely.

I see. Just a couple of follow-ups. So one is, what is holding back the government as far as the conversion of the deferment of AGR and spectrum dues into equity is concerned. Because you are highlighting that the discussions are in an advanced stage and waiting for the government's equity conversion. So that's 1 follow-up. And secondly, I missed the explanation you gave on the number of sites in total not increasing that much despite rather the reconciliation between the total broadband sites and the disclosure on how much you shut down in 3G and addition on 4G.

Okay. So let me continue with the second question first, which is in line with the network discussion we were having and then I will come to the conversion part. You see the way it works out is that generally, the way broadband sites are counted is that 2,100 3G sites is counted as 1 site and a 4G FDD site, whether it is 2,100 megahertz band or this is also counted separately. So suppose you had a site on which you had 2,100 3G as 1 carrier and 2,100 megahertz band 4G as 1 carrier existing, and if you convert the second carrier of 3G into 4G, then it would actually appear as a reduction on 1 site on the broadband portfolio. So this is what is happening that if the first time conversion of 2,100 megahertz band from 3G to 4G happens, that is number of sites neutral. However, if there is a carrier already existing on 4G and another carrier is converted from 3G to 4G, then you would see it as a reduction in the number of broadband sites, which should offset the increase in the new rollout of 4G sites. On the second question relating to the government conversion, basically we are in discussions with the government, and I also do not know exactly the reason why this is not happening, government is taking some time. From our point of view, we had exercised this option to convert in January. Post that, we had also had a discussion with DoT, they had sent to letter to us in March, and then we have confirmed the amount of conversion, which was agreed between DoT and us in the month of April. Post that, we have had no communication from DoT in this matter. So we continue to be engaged with DoT, and we expect that this should happen soon.

The next question is from the line of [ Rishabh Tanjolia ] from HSBC.

I just want to check up more on the ...

Sorry to interrupt you, Mr. Rishabh. The audio is not clear from your line. Please use the handset mode.

Is it better now? So on the new postpaid plans that we have launched, the INR 700 and INR 1,100 price points also have unlimited data plans, which is new in the industry. Can we learn more about the rationale behind the same? And what it could signal for the competitive intensity in the market?

I think I would not specifically be able to comment on what is the rationale for a specific plan. As I had mentioned earlier that we have kind of revamped our postpaid offering, so that more people are attracted to the postpaid, which generally is a sticky proposition. People stay there longer. There are more offerings, which we can give to them in terms of OTT content, which is bundled with these plans. So ultimately, it is an analysis of what is it that we are offering. And I mean, even whether you have an unlimited plan or you have a large data plan, the usage is somewhat governed by what a person will use, but it just gives the freedom for a person to have that comfort that "I'm not constrained." So unlimited doesn't mean that the usage would just go out of control. So I would say, ultimately, the whole objective of this postpaid offering is to kind of come back with the postpaid offering, which then is attractive to the market, and we can grow our postpaid portfolio.

The next question is from the line of Akshat Agarwal from Jefferies.

I have 2 questions. Firstly, your enterprise revenues have grown quite rapidly in the second quarter. What has driven this growth? And what sort of growth can we expect from this revenue line? That's the first. I'll ask my second after you -- after I get the answer for the first one.

You go ahead with the second question.

Second one is a bookkeeping question. Why have the network and SG&A costs increased rather sharply in this quarter again?

So the network cost, I would request Murthy to answer. And in the meanwhile, I'll come back to the enterprise revenue growth question.

So Akshat, the network costs, the increase in network costs largely is on account of few factors, higher power and fuel costs on account of both consumption rates, including [ some of them have catched ] up additional one day this quarter compared to the previous quarter. Then as I mentioned earlier, the AMC costs have also increased on account of [indiscernible] equipment coming out of warranty. And then, of course, we had some [ LTE ] sites, which were rolled out this quarter. So it's a mix of all of them. And while the post IndAS116 obviously shows an increase. I think we need to look at it from an operational perspective, which would take rental changes, and therefore, that element is much lesser.

On the SG&A cost?

The SG&A cost is something which the increase of that is on account of largely the spends that we have done during the quarter and this includes the cost. This is the cost which i think which have gone up and including the gross asset increase in the quarter.

So on the enterprise revenue, there is a significant amount of increase, which is coming from the wholesale voice business, which also results in a consequent increase in the connect costs. So that is reflected in the cost increase there also. But other than that, there is an increase in revenue in other streams also. One of the major revenue increases is coming in India incoming calls, where there also has been some price intervention. So -- and also the international SMS. So these will continue to grow. Again, as I said, IoT is a segment which is showing good growth. So this is a segment which will continue to grow. So I would say, I mean, while I cannot give you specific guidance, but enterprise space is an area where in the interim, we had some losses when there were concerns before the reform package. Post that, we have been getting good traction. Even in the SLD business and all are new order, while some of this would convert to revenue a little later, our order booking has been good. And so we will see some conventional streams of enterprise business, which will grow in the normal way. But there are items like IoT, smart metering and all, where there is a large opportunity where growth will be fast. One of the areas which I talked about is smart metering where I understand that the government has vision of [ 50 ] million meters connected. Out of which I understand today, only about 10% of those meters are connected. We have a leadership in that segment with almost 2 out of every 3 meters, which are from our connections. So that is, again, a very high growth opportunity. So as I said, enterprise business will continue to be a mix of conventional growth, which is at a steady rate; new revenue streams, which will grow at the faster rate; and as I said, we have also showcased multiple opportunities in the IMC on the enterprise business and we continue to work with our partners to develop some of those use cases, which can then become new business opportunities going forward.

The next question is from the line of Pranav Kshatriya from Nuvama.

I have 2 questions. Firstly, you have done this deal with ATC for optionally convertible debentures. Can you just detail what are the contours of the instrument in terms of how much is the duration and at what level or when it gets converted? And can you try and use the similar instrument for reducing your almost INR 15-odd crore trade payable? So that's my first question. And second question is regarding the 5G rollout time line. I mean you did mention that it is contingent on the fund raise. But what I'm trying to understand is that after the fund raise, you think you will be able to roll out very aggressively, considering the competition has already set up pretty aggressive plans for their rollout at the pan India level. So those are my 2 questions.

Okay. Thanks, Pranav. So I think on the ATC transaction, I would suggest, I mean, we have sent out EGM notice, which has most of the details of that transaction. But the specific response that you're looking for is that what is -- the term of the OCD is 18 months. And there is some redemption which happens in between. There is some redemption which happens at the end of 18 months. The instrument is convertible any time at the option of the subscriber, which is ATC in this case. And there is also an agreed threshold at which level VIL can also ask for a conversion for at least half of that quantum. This becomes available after the 1-year lock-in period, which applies to all these kinds of preferential allotments. So does that answer the question on the ATC before we go out to the next one?

So can you use this similar arrangement with other parties as well?

So it is like this that we have kind of -- suppose there's two other large vendors who cannot do it for very small vendors. But I mean, the few large vendors that we have, we have offered that. Of course, this is also governed by a regulatory requirement. So wherever it is possible, there's a large vendor and by regulation, it is possible, we are happy to continue doing this with other vendors also. Of course, it depends on what the vendor's policy is and what are they interested in doing also. Moving on to the 5G rollout. I would say that we are ready with our plans. We are engaged with our vendors. So once the funding is in place, we will be able to kind of roll out and execute quite quickly. As you are aware, generally, the rollout is fairly modular. And so rolling out will not be so much of an issue. Also from a perspective of the backhaul now the e-band has also been offered by the government. So that sometimes becomes one of the bottlenecks for kind of expanding any high-capacity network. So with the E-band available, I think that can also be addressed. So we believe once the funding is in place, we should be able to roll out quite quickly. Of course, I do understand that the competition has already started rolling out. So we will be behind them. But given the way that the 5G handset ecosystem has now started evolving and it would take some time, so we don't think it will be a major disadvantage or any significant disadvantage if we are able to have the funding done in a couple of months and then roll out on that basis.

The next question is from the line of K Thakkar from KSL.

Can you hear me?

Yes, we can hear you now.

My questions are in regards to the 5G things and -- hello.

Yes, sir, we can hear you. Please go ahead.

I can't get your voice.

Sir, we can hear you. Please go ahead with your question.

My question is in regards to the conversion thing. I mean, just now Mr. Moondra said that since April onwards, they have not heard anything from DoT. So what are their future plans regarding engaging with the government in this regard, so that the funding gets concluded over a period of time. Because we have been hearing all these things from the investors who wish to infuse funds expecting some clarity from the government itself. And I know that the AGR thing has been long, I mean it's been a story of the past now. But are there any plans of the company on the review petition or a curative petition in this regard in the Supreme Court for the reworking. I know it's not been allowed in the large judgment, but still any -- the management can throw light on the same?

Okay. So I think on the GOI conversion, I have nothing more to add, except saying that we are engaged with the government to say that what was communicated to us as a part of the reforms package. Based on that, the conversion should happen. We already have an agreement on the amount to be converted. So we are pursuing the matter with the government that the conversion happens quickly, because that kind of paves way for many other things, especially funding that we are planning. So that is as far as the government conversion is concerned. Now as far as the review of the AGR matter is concerned, the review petition is in the Supreme Court. Just to be clear, there is no bar against filing a review petition or filing a curative petition in the judgment itself. So that is permitted. The review petition was filed last year. It has not come up for hearing. But that kind of we will pursue it at a suitable time. The review petition is already in the court.

Okay. So I mean, is there a delay in the conversion in regards to the review petition that in case there is a reworking and the amounts are brought down, how would the conversion and everything take place in that regard? I mean is there a delay due to that working or something like that?

No, no, I don't think the 2 subjects are totally unconnected. And let me share that suppose an agreed amount is converted today, that gets reduced from the amount which is to be paid. Now the installments are calculated on the amounts calculated before as per the demand, and the conversion which has happened. If there is any revision in the overall amount of the AGR demand, then the conversion amount would still get deducted and the changed balance amount would determine the installment. So the two matters are totally unrelated. There is no link between the two.

Okay. So sir, I request from your guys to pursue with the government, because the government is like in the world, it says that we are very fast enough in doing business. But these kind of things, I mean happening from DoT not replying, I think that is probably, I mean, halting the fund infusion and all that. And by that, I would just end my questions and wish you all a very happy new year and success in the new year itself.

We are continuing to pursue this with the government.

The next question is from the line of Aliasgar Shakir from Motilal Oswal.

Question is on the churn that we have seen going up and also probably, as you mentioned, that SG&A has also gone up. When we see other telcos in this quarter, because of the SUC benefit, they have all seen very strong incremental margins. So just wanted your thoughts on going forward. First of all, on SUC, what kind of additional gains we can see? And secondly, given the fact that churn has gone up, what are the kind of trends we are seeing and what is the kind of SG&A cost increase we should see because of that, should that continue to go up? Or we should expect them to normalize from your end, see better incremental margins?

So before I come to churn, which is a longer reply, let me just address the point relating to SUC. So the SUC gain has reflected for, let's say, roughly half of the quarter in Q2, and the balance for the full quarter will come first time in Q3. Very roughly, this would be a benefit of 3% on mobility AGR or 2% on the reported revenues, because there are multiple revenue streams on which we kind of calculate the SUC. I think the overall amount is very roughly INR 200 crores of per quarter of the overall savings. So that is as far as the SUC is concerned. As far as the churn in SG&A, which are related topics, as we said, that one is, of course, this is a seasonally weak quarter. So you would have seen that while there is some differential, but everybody has seen a reduction in the net adds compared to the last quarter. So this is not specific to us, but applies to everybody. Of course, as we said that our net adds are negative because of the impact of lack of coverage. Also, we had some pricing interventions at the entry level towards the end of the last quarter. Those have given us some revenue benefit, but that has also resulted in some consolidation of the sense, which has kind of increased the churn a little bit. So it's a mix of some subscribers have upgraded to unlimited plans, which is positive; it has resulted in some consolidation of sense, which is negative. In overall terms, it has been positive. So that is a factor which is specific to this quarter where it has had some impact on the churn. On the SG&A, my comment would be that this cost has gone up over the last few quarters, and there is a need to address this in some ways. But before I come to that, I would say that you would have seen our trends both in terms of the gross adds where for, now I think 3 quarters in succession, we have improved our performance and not only improved our performance, we have at least come to a point where we are getting a rightful share of the gross adds market, which was very important to us to establish our competitiveness. Also in the MNP segment, we have actually been able to address the churn to some extent, and our overall performance in terms of net adds or net loss on the MNP side has actually improved quarter-on-quarter. So I would say that while the SG&A costs have gone up, however, at the same time, this has enabled us to establish our competitiveness in the market and to give us a fair share of the market where we participate in. However, having said that, I think the SG&A costs go through a cycle from time to time. And so this has happened in the past that these continue to go up and then we then see some corrections where the trend is reversed, because nobody can really sustain this kind of a cost for a long period of time. So we do believe that there will be some correction, but basically, our objective is to compete in the market, to participate in the market, get our fair share in the market. Within that premise, we would also be looking at getting more rationality to this SG&A cost, which has been increasing over the last few quarters.

Understood. This is a very detailed explanation. Just 1 quick follow-up. So from your comments, I understand that we are certainly not at the end of that cycle of increased. I would say, aggression towards acquiring customers, right? We may see the current trends continuing for some time.

I mean I only said that these things go through a cycle, when does the cycle end and the fresh cycle starts, I'm not commenting on that right now. But definitely, these are cycles we have seen several times in the past.

Ladies and gentlemen, due to time constraint, we will take that as the last question. I now hand the conference over to Mr. Akshaya Moondra for closing comments.

Thank you, Faizan. I would like to summarize by saying we have reported 5 quarters of sequential growth in several key metrics, including ARPU and 4G subscribers. We remain focused on providing superior data and voice experience and are building a differentiated digital experience, adding several digital offerings in the recent months. The transaction with ATC also clearly reflects the relationship that the company shares with one of its key vendor, their belief in long-term prospects of the company and build confidence towards further capital raise. We also continue to actively engage with our lenders and investors for further fundraising. All these initiatives, coupled with the liquidity provided by the government reforms package, tariff corrections and positive impetus from draft telecom bill will enable VIL to make network investments and compete effectively to improve its overall position. Thank you all for joining this call. Have a good evening and a good weekend.

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.