Britain’s leading telecom major Vodafone today said competitive pressures in India with free services offered by Reliance Jio and the impact of demonetisation on prepaid top-ups is impacting business.
Both these factors led to a nearly 2% drop in its service revenue from the country.
The company also confirmed merger talks with Idea Cellular as part of its third-quarter results for the period that ended on December 31, 2016.
“Our strong organic performance in South Africa and Turkey was partially offset by India, where the sector is affected by free services from the new entrant,” Vodafone Group chief executive Vittorio Colao said in a statement.
“We anticipate intense competitive pressure in India in the fourth quarter and are taking a series of commercial actions, including the extension of 4G services to 17 leading circles. As announced earlier this week, we have also entered discussions with the Aditya Birla Group about an all-share merger of Vodafone India and Idea,” he added.
In India, the service revenue for the firm declined by 1.9 per cent, which it said was “driven by heightened competitive pressure following free services offered by the new entrant and the adverse impact of demonetisation on prepaid top-up volumes during the quarter”.
“We increased our overall customer base and continued to retain our high value customers, but saw increasing pressure on both prices and customer usage,” Vodafone said.
The London-headquartered telecom giant also reported a decrease in revenues in its home market of the UK, also as a result of price competition.
“In the UK we have made good progress in improving customer service but face heightened price competition in enterprise,” Colao said.
“Our overall performance in Europe and Africa remained strong during the third quarter, reflecting good execution. In Europe, service revenue growth continued, led by Italy, Germany and Spain,” he said.
“Mobile contract ARPU continued to stabilise, reflecting the successful adoption of our ‘more-for-more’ propositions, while we remain Europe’s fastest growing broadband company, illustrating our effective convergence strategy. We are reconfirming our guidance for the year and are confident that we will sustain our commercial momentum,” he added.
The group’s total revenue was 13.7 billion euros and group service revenue was 12.3 billion euros.
The total revenue declined 3.9%, including a 4 percentage point negative impact from foreign exchange rate movements.