MUMBAI (NewsRise) -- Vodafone Idea, India's biggest mobile phone operator, said its Chief Executive Balesh Sharma quit citing personal reasons, even as the unprofitable carrier grappled with mounting debt and shrinking user base amid intensifying competition.
Vodafone Idea appointed its British parent Vodafone Group's current India representative and former CEO of its Romania unit Ravinder Thakkar as its new managing director and CEO with immediate effect. Sharma will take a new role with Vodafone Group, the Indian company, backed by billionaire Kumar Mangalam Birla's Aditya Birla Group and the U.K.'s Vodafone Group, said in a statement last night.
Sharma's departure comes at a time when Vodafone Idea is locked in a high-stakes battle for market share with Bharti Airtel and Reliance Jio Infocomm. India's telecom market has been roiled by the price war triggered by the entry of billionaire Mukesh Ambani's Reliance Jio in 2016, offering free voice calls and low-cost data plans.
The cut-rate price war pushed existing players to consolidate or exit, shrinking the industry that once had more than a dozen players. Currently, only three companies offer wireless mobile services in India. In August 2018, Birla Group-backed Idea Cellular merged with the Indian operations of Vodafone in a $23 billion deal that catapulted the new entity to the top of the pecking order, edging out Bharti Airtel.
Since then, the company has lost nearly 580 basis points of market share as it contended with slowing investments and declining network quality.
According to the latest data from the Telecom Regulatory Authority of India, Vodafone Idea lost 4.1 million subscribers in June, compared with an 8.3 million increase at Reliance Jio.
Both Vodafone Idea and Bharti Airtel have been weeding out their low-paying users in a bid to strengthen the quality of their revenue. After nearly four months of decline, Bharti managed to stem its subscriber losses in June.
According to a Business Line report, Sharma's resignation is a reflection of the "turf war" within the merged entity. "Operationally, the organization has split into two camps at several levels," the newspaper quoted an unidentified executive as saying.
A potential leadership rift could not have come at a worse time for the company. Vodafone Idea's cumulative losses in the last four quarters amounted to 197 billion rupees ($2.75 billion), sparking concerns about whether it could run out of cash in the next year.
The company's debt at the end of the June quarter stood at 993 billion rupees. In March, it had raised about $3.6 billion through a rights issue, a move it hoped will help cut debt and shore up its stressed balance sheet.
Last month, brokerage Emkay said a "meaningful tariff reversal" is the key for a financial turnaround and reduction in the dependency on incremental external funding for Vodafone Idea. This would be possible only if a price increase happens across the industry, it said.
An industrywide price increase is unlikely immediately, given Reliance Jio's stance of not chasing revenue before grabbing more than half of the revenue market share and over 500 million subscribers.
However, some analysts expect a price increase no later than the end of this fiscal year.
Reliance Jio will look at raising its tariff from the fourth quarter of this fiscal year, considering the higher payouts toward its investment trust and to fund additional capital expenditure required for a bigger network to cater to 500 million subscribers, Edelweiss Securities said Tuesday.
Shares of Vodafone Idea, which has plunged 85% since the beginning of this year, lost 2.5% in Mumbai trading on Tuesday. The benchmark S&P BSE Sensex closed 0.2% lower.
--Dhanya Ann Thoppil