Vodafone Idea (Vi) has reportedly decided to sever ties with about 25,000 retail partners as the cash-strapped telco looks to save on costs.
What Happened? The loss-making telecom operator has chopped off around 5-7% of its network as these retail partners were giving it negative returns in terms of customer acquisition costs, sources told the Economic Times.
Vi has reportedly stopped paying commissions to a number of multibrand retailers, which also provide services to competitors Reliance Jio and Bharti Airtel. At the same time, Vi is adding new retailers to aid its customer acquisition efforts as it loses subscribers to its peers at an alarming rate.
Vi’s decision comes as it continues to face consistent subscriber losses, with its user base shrinking to 22.59 crore in Q4 of FY23 from 24.38 crore a year ago, and a net loss of Rs 64,18.9 crore in the January-March period.
According to Kotak, Vi’s selling, general, and administration (SG&A) costs, including customer acquisition expenses, increased by 29% year on year in Q4 to Rs 1,456 crore, resulting in a 45% rise in SG&A costs for FY23 versus FY22.
Vi had previously offered high commissions to dealers in an attempt to halt the decline in customer numbers, but realized that the acquired customers did not meet their expectations in terms of quantity and quality, the sources said.
It was previously reported that Vi plans to infuse ₹14,000 crore in equity to revive its business, with Aditya Birla Group and UK-based Vodafone GroupPlc investing half of the amount. The Indian government had approved the conversion of Vodafone Idea's dues worth ₹16,133 crore into stock, with assurances from the promoters regarding additional equity infusion.
Price Action: Vi’s share price was up 1.28% at ₹7.90 in early morning trade on Friday.
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