vodafone idea ltd share price Management discussions


INDIAN WIRELESS SECTOR

The wireless sector remained the firm backbone of Indias digital infrastructure, during the period when COVID-19 caused unprecedented and unforeseen challenges across the world. Through these difficult and challenging times, the mobile operators played a critical role in providing seamless connectivity to millions of Indians. While the operating environment continues to remain challenging with unsustainable tariffs, increasing digital penetration remains a massive opportunity for the telecom industry. Increasing data consumption, especially through video, social media usage as well as increasing online commerce is driving strong demand for high speed internet which is expected to further increase in future. All the telecom operators with their massive network investments, are well placed to benefit from the ongoing digitalization trend.

In a major industry development, all the operators have taken tariff interventions during the year across all unlimited prepaid bundled plans, entry level combo voucher plans as well as post-paid plans. While the tariff interventions have helped drive ARPU improvement during the year, the industry continues to operate with unsustainably low tariffs. India continues to have the lowest tariffs globally, while the proliferation of unlimited data bundles have led to India having one of the highest data usage (per subscriber) in the world. Further, the ARPU levels remain lower in comparison to historic trends, despite the fact that the consumer gets much more value in terms of unlimited voice and daily data allowances, compared to five years ago. Your company, thus, believes the market will be able to absorb further tariff hikes at a regular intervals, which is essential for operators to generate reasonable returns on their capital employed and support future investments, including new technologies.

India continues to remain an attractive market for telecom industry despite the past challenges of hypercompetition and subsequent financial stress in the sector. The consolidation of the industry to three large private operators and one government operator positions the surviving operators well to benefit from the growth opportunities on the back of Indias digitalization trend. India has a compelling macro-economic backdrop with growing and resilient Indian economy and has huge market potential underpinned by large and growing population. Indias young population, rapid urbanization and growing middle class ensure a growing subscriber base in the target demography. The overall tele-density for India as of March 2022 stood at 83.1% suggesting there is still a proportion of population, yet to start using mobility services. This holds true especially for rural areas where tele-density is still low at 57.9%, which remains a significant opportunity for the Indian telecom operators.

The continued accessibility to mobile services and low priced tariffs has spurred the growth and deployment of wireless broadband internet. Mobile broadband is the primary medium to access internet in India as the lack of adequate wired internet infrastructure restricted its growth only to major cities. As of March 2022, the wireless broadband subscribers base of 761 Mn in India was almost 28 times compared to 27.3 Mn wired broadband subscribers (source: TRAI). While the industry continues to witness robust 4G subscriber addition, at 56% 4G penetration (as a % of population), its still lower compared to developed countries and will remain an incremental opportunity for the Indian telecom operators. 4G penetration is estimated to further increase to 76% by 2025, as per GSMA intelligence.

On September 15, 2021, the Government announced a comprehensive reform package for the Indian telecom sector including measures to address the structural, procedural and liquidity issues. To address the immediate liquidity concerns of the sector, Government had provided an option of up to four years of moratorium on AGR dues and spectrum instalments due between October 2021 and September 2025 with an option to convert interest arising from such deferment into equity upfront. Your company has already opted for deferment of Spectrum and AGR dues as well as conversion of interest arising from such deferment into equity. Other reforms include clarity on AGR definition, reduction in bank guarantees, removal of penalty and reduction of interest for delay in payment of LF and SUC etc. All these reforms are expected to provide long term benefit to all the operators, including your Company. The reforms package and the implementation has been welcomed by all stakeholders of your Company including the banks and investors.

During the year, TRAI had initiated consultation on 5G auctions to take the industrys inputs on pricing, quantum, timing, among other things. All the operators had requested the pricing of 5G spectrum to be reduced by 90-95% and operators be given lenient payment terms like no upfront payments, so that capital is not tied up in spectrum commitment, but is deployed to enable 5G network investments. TRAI has incorporated several of the operators requests and the pricing has come down by ~35%. An option of making annual payments over the life of spectrum as against a large upfront payment has also been provided. Your company continues to engage with TRAI and DoT on this matter and auctions are expected to happen in financial year 2022-23.

Smartphones have been the epicenter of Indias phenomenal data growth story as an average Indian spends approximately 5 hours daily on a smartphone which is one of the highest averages globally (Source: Nokia - India Mobile Broadband Index 2021). Smartphone penetration has seen significant growth in the last 5 years and now stands at 58%. This is backed by factors like high growth in the number of smartphone users, including growth in rural areas, usage of OTT platforms, social media, e-learning, online shopping and companies leaning towards hybrid/flexi working models. The strong growth in smartphone users and the evolving capabilities of 4G and 5G networks open a much larger addressable market for sectors where internet is needed.

The ongoing digital revolution offers significant growth opportunities to the Indian telecom operators. As a part of the Digital India Vision, Indian government leads the ambition of US$1 trillion economy based on unlocking US$500 billion value from new and emerging digital ecosystems. Due to increase in digital adoption in all forms, usage of digital payments also increased. As per National Payments Corporation of India (NPCI) data, UPI monthly transactions as of March 2022 is US$128 billion, nearly 400 times compared to March 2017, reflecting the exponential increases in digital payments. The COVID-19 pandemic further acted as a catalyst accelerating adoption of digital infrastructure. As there has been a shift from physical stores to digital engagement channels, your Company has also witnessed significant increase in digital recharges compared to pre-pandemic level.

Acceleration of IoT, growing OTT consumption, rapid adoption in gaming and ecommerce open up deep addressable markets across all digital verticals for Indian telcos, as wireless connectivity remains the key enabler. Further, the telecom operators are not just offering voice and data services, but also a suite of digital service applications, own as well as through partnerships, and are thus transitioning from being pure telecom service providers to integrated digital service providers offering entertainment, information, cloud and storage services.

DISCUSSION ON VODAFONE IDEAS OPERATIONAL PERFORMANCE

Mobile Business overview

Your Company, an Aditya Birla Group and Vodafone Group partnership, is a major telecommunication operator in India, offering Voice, Data, and other Value Added Services ("VAS"), business connectivity services including IoT, Cloud, managed services etc. Your Company is continuously engaged in developing world-class infrastructure to introduce newer and smarter technologies for its retail and enterprise customers. Your Company aims to offer future ready technologies with innovative offerings that can be accessed conveniently through an ecosystem of digital channels as well as extensive presence on the ground.

1. Voice Services

Your Company offers Voice services in all 22 service areas. Your Company now covers more than 1.2 Bn Indians in over 487,000 census towns and villages with its Voice services. Your Company also provides 4G VoLTE across all 22 circles to provide enhanced voice experience to its 4G subscribers. Your Company also offers Voice over WIFI (VoWiFi) calling feature for its subscribers in several circles which is gradually expected to expand to rest of the country.

2. Broadband Services

Your Company provides broadband data services on 3G and 4G platforms in all 22 service areas of India. Your Companys broadband coverage is available in over 338,000 census towns and villages, covering more than a billion of the Indian population. The population coverage on 4G is more than 1 Bn as well, as of March 31, 2022. During Financial Year 2021-22, your Company has been shutting down its 3G network, while it continues to focus on expansion of its 4G network, your Company has thus seen a steady rise in 4G subscriber penetration (as a percentage of reported subscribers) increasing from 42.4% in Q4FY21 to 48.4% in Q4FY22. As your Company continues to focus on 4G network expansion, 4G subscriber penetration should further improve in the coming years.

3. Content and Digital Offerings

Your Company has launched several digital initiatives during the year to address the changing requirements of todays digital society enabling individuals and enterprises to get a range of benefits and value-adds. Vi offers not just enriched connectivity but also an array of digital products and services to complement the core business.

To provide best in class content to its customers through the application Vi Movies and TV, your Company has tied up with various content creators and OTT apps like Voot Select, Fireworks, Sun NXT, Shemaroo Me, Hoichoi, Lionsgate Play, Hungama, TV Today, Discovery and others. The app provides a range of content including Movies, Live TV, TV shows, latest originals and short formats videos in 16+ languages. Additionally, your Company has tie ups with leading content providers like Amazon Prime, Hotstar, Zee5 and Netflix for its premium customers.

During the year, Vi has integrated Vi Movies & TV app content with Vi app to allow easier access without having to download multiple apps. With this integration now Vi users can watch movies, web series, over 400 Live TV channels on Vi app. In line with focus to offer the best of entertainment services to its customers, your company also recently launched Music service on Vi app for all its customers in association with Hungama Music. As Vi continues to strengthen its partnership portfolio, your company partnered with Nazara Technologies a premiere gaming and investment firm to launch Vis first gaming service. Lastly, your company has launched Vi Jobs & Education on the Vi App in partnership with ‘Apna that offers free priority access to Indias largest job listing, ‘Enguru, an English learning platform, and ‘Pariksha, a mock test platform which facilitates preparation for government jobs.

4. Other VAS Offerings

Your Company offers a variety of other Value Added Services (VAS) offerings, including:

- Entertainment services such as sports (score updates), IVR based content, WAP based games;

- Voice and SMS based services such as caller tunes, voice and SMS chat, star talk, expert advice and subscriptions services; and

- Utility services such as missed call alerts, doctor on call, astrology services etc.

Long Distance Services and ISP

Your Company holds licenses for NLD, ILD, ISP and IP-1 services. These licenses are used to carry inter-circle voice traffic of your Company and also bring incoming voice traffic from top international carriers across the globe in to India. Your Company also sends all of the outgoing International Voice traffic on its own network and the interconnections with these licenses enable it. These licenses also help your Company to offer various Enterprise Fixed Voice and Data Services to external customers like Enterprise, Government and Wholesale customers. Vodafone Idea ISP currently handles all captive subscriber traffic requirements.

Business Services

Vi Business provides total communications solutions to empower global and Indian corporations, public sector & government bodies, small & medium enterprises and start-ups. With well-established enterprise mobility, robust fixed line connectivity, world-class IoT solutions and insightful business analytics & digital solutions, your company brings the smartest and newest technologies to serve businesses in the digital era. With the advantage of its global expertise and knowledge of local markets, Vi Business endeavours to be a trusted and valued partner for businesses in a digital world. In Vi Business, as VIL progresses on the journey from telco to techco, your Company continues to strengthen engagement with customers with a range of offerings like Vi Integrated IoT, an end to end IoT solution, Managed SIP, Vi Cloud Firewall Service and Vi Business Plus bundled mobility offering.

Competitive Strengths

1. Competitive Spectrum Profile

Your Company has a total of 1,768.4 MHz of spectrum across various frequency bands out of which 1,738.4 MHz spectrum is liberalised and can be used towards deployment of any technology (2G, 3G, 4G or 5G). Your Company acquired 23.6 MHz of spectrum in March 2021 auction across 900 and 1800 MHz in 5 circles as well as optimized spectrum holding in some circles. With this spectrum purchase, 1,340.4 MHz of spectrum has been acquired through auctions between year 2014 and 2021 and is having the validity until 2034 to 2041. This large spectrum portfolio across 22 circles allows the Company to create enormous broadband capacity and ability to offer superior customer experience.

Below table provides the spectrum held by your Company across all service areas:

Liberalised Spectrum
Circle 900 1800 2100 2300 2500 Total FDD x 2 + TDD
Andhra Pradesh 5.0 6.6 5.0 - 10.0 43.2
Assam - 25.0 5.0 - 20.0 80.0
Bihar - 13.4 5.0 - 10.0 46.8
Delhi 10.0 10.6 5.0 - 20.0 71.2
Gujarat 11.0 20.8 10.0 - 30.0 113.0
Haryana 12.2 15.8 15.0 - 20.0 106.0
Himachal Pradesh - 11.2 5.0 - 10.0 42.4
Jammu & Kashmir - 17.0 5.0 - 10.0 54.0
Karnataka 5.0 15.0 5.0 - - 50.0
Kerala 12.4 20.0 10.0 10.0 20.0 114.8
Kolkata 7.0 15.0 10.0 - 20.0 84.0
Madhya Pradesh 7.4 18.6 5.0 10.0 20.0 92.0
Maharashtra 14.0 12.4 15.0 10.0 30.0 122.8
Mumbai 11.0 10.2 10.0 - 20.0 82.4
North East - 25.8 5.0 - 20.0 81.6
Odisha 5.0 17.0 5.0 - 20.0 74.0
Circle 900 1800 2100 2300 2500 Total FDD x 2 + TDD
Punjab 5.6 15.0 10.0 - 10.0 71.2
Rajasthan 6.4 10.0 15.0 - 20.0 82.8
Tamil Nadu 5.0 11.4 15.0 - - 62.8
Uttar Pradesh (East) 5.6 10.0 20.0 - 20.0 91.2
Uttar Pradesh (West) 5.0 15.0 10.0 - 20.0 80.0
West Bengal 7.4 23.4 5.0 - 20.0 91.6
Total Liberalised 135.0 339.2 195.0 30.0 370.0 1,738.4
Administrative Spectrum 6.2 8.8 - - - 30.0
Total Spectrum 141.2 348.0 195.0 30.0 370.0 1,768.4

2. Extensive Network Infrastructure and Coverage

Your Company has a strong network footprint across the country which enables it to offer comprehensive consumer offerings as well as have substantial capacity spectrum to address the growing data demand. Your Company has large network assets in the form of 2G, 3G, 4G equipment and country wide Optical Fibre Cable (OFC). Your Company has ~185,000 unique towers across 487,000 census towns and villages covering more than 1.2 billion of Indian population. Your Company has over 455,000 broadband (3G + 4G) sites across over 338,400 census towns and villages. Your Companys broadband coverage stands at over a billion Indian population with presence in 169,016 unique broadband locations as of March 31, 2022. The 4G population coverage stands at over 1 billion as well, as of March 31, 2022. Your Company has a combined portfolio of over ~289,000 km of OFC including own built and Indefeasible Right of Use (IRU) OFC, and excluding overlap. Your Company also has Pan India Voice over LTE (VoLTE) services and has also started to offer VoWiFi services in select circles, which will be gradually rolled out in rest of the country.

Your Company continues to focus on enhancing its 4G infrastructure. During the year, your Company continued to aggressively upgrade its 3G network to 4G. Your Company has been deploying LTE on TDD band of 2300 MHz and 2500 MHz spectrum band to expand the capacity and on 900 MHz band on select sites to improve customer experience in dense areas. Your Company has also been investing in 5G ready infrastructure including cloudification of core enabling it to provide 5G services in line with the evolution of the ecosystem. Your Company continues to deploy Dynamic Spectrum Re-farming (DSR), and Small Cells to maximize spectrum efficiency. Massive MIMO deployment of your Company remains the largest in India.

3. Large Subscriber Base

Your Company has 243.8 Mn subscribers as of March 31, 2022, of which 118.1 Mn were 4G subscribers. As your Company is expanding its 4G coverage and capacity, this large subscriber base provides a great platform to upgrade voice only customers to users of data, content and other digital services.

4. Power Brand

Your brand Wl , which was launched in September 2020, continues to garner strong awareness, building brand affinity across all customer segments in the country. Your company continues to make extensive progress on the marketing front by communicating key differentiators and entering into various alliances, introducing various innovative products and services.

Brand Vi is building a competitive advantage by increasing customer engagement and heralding a new digital ecosystem with the introduction of Music, Games, jobs & education services. Vi partnered with Hungama Music which was extensively promoted on TV, digital, PR & for a 360 integrated campaign packing impact. Your Company also launched Vi Games during the year consisting of 1000+ games including exclusive titles from Disney and Pixar. In line with your Companys brand philosophy to enabling its customers to thrive, Vi launched Jobs and education services on the Vi app, by partnering with Apna, Enguru and Pariksha which will help youth to have an equal opportunity of access to services like finding jobs & professional networking, learning to speak English and preparation of government exams. All these initiatives have been extensively promoted across TV, Digital as well outdoor media, which is leading to stronger perception, improving customer engagement as well as brand affinity. Vi Brand has won several industry recognitions. Vi won

a bronze award for the best media innovation on TV award for it is #ViIsHere campaign at EMVIES 2022. Vi was also recognised as the buzziest brand during IPL 2021 and also won the Gold & Silver award at the Indian Digital Marketing Awards (IDMA) 2021.

Overview of Key strategic initiatives

Your Companys core priority has been to focus on providing superior customer experience and drive differentiation through partnerships, all this with the aim of improving cash generation in existing businesses and drive monetization in the new revenue streams. Post realization of merger synergies, your Company had undertaken a cost optimization exercise and realized incremental opex savings of 90% of the targeted Rs 40 Bn annualized savings on a run rate basis as of end of Calendar Year 2021. Below are the ongoing major strategic initiatives to improve your Companys revenue and profitability as well as to strengthen its overall position in the market:

1. Focus on Network Investments

Your Company, since merger, had a focused approach to investments, biased towards its profitable areas, to utilize its capex effectively while ensuring superior customer experience. Your Company is driving incremental 4G investments in its 17 priority circles, which contribute 98% of its revenue and 93% of industry revenue, to further strengthen its position in these markets. While most of the incremental capex is being directed towards these 17 circles, your Company will continue to invest in profitable districts of the remaining 5 circles and remains committed to ensuring seamless connectivity in these 5 circles.

During Financial Year 2021-22, your Company has focused on refarming 2G & 3G spectrum to 4G, which has added incremental 4G sites with minimal capex for software upgrade. Your Company has closed around 32,000 3G sites during the year, while adding around 35,000 4G FDD + TDD sites. Resultantly, our broadband site count is moderately higher YoY at 455,264 vs 452,650 a year ago. The re-farming of 3G spectrum to 4G on majority of sites in various cities has substantially enhanced the GIGAnet 4G capacity which is now over 2.9x compared to September 2018, just after the merger. During the year, your Company has also invested in upgrading the core and transmission network. Your Company has also been driving fiberization of 4G sites to support capacity expansion and the overall fiber footprint stands at ~289,000 km, including own built as well as IRU, excluding overlapping routes.

Your Companys relentless pursuit to have the best 4G network, through integration and incremental network investments post-merger, is clearly visible through the top rankings across various third party reports on both data and voice. Your Company also had the highest rated voice quality in the country as per TRAIs "MyCall" app data for 15 out of 17 months consecutively between November 2020 and March 2022. This is not only providing a great experience for its customers but also helping your Company drive stronger network perception leading to better customer response in the market.

While your Company is currently in the middle of its 4G capex cycle, it is also deploying equipment which is 5G ready on both radio and core. Your Company has already deployed and using an array of 5G technologies such as Massive MIMO, DSR, Open RAN, Cloudification of core etc. Your Companys focus on leveraging new technologies and partnerships for a better tomorrow for Vi users, has led us to showcase a wide range of 5G use cases for enabling smart cities, smart infrastructure, smart auto, smart sports training, remote healthcare, connected schools, drone based surveillance, gaming and many others, during 5G trials in Pune and Gandhinagar, to make enterprises and citizens smarter. During the 5G trials, your Company displayed many industry first use cases like "Network slicing", "VoNR" (Voice over New Radio) as well as several use cases related to enterprise and B2C.

2. Market initiatives to improve ARPU

Your Companys priority remains on driving ARPU improvement. During the year, your Company has taken several tariff interventions specifically, effective November 25, 2021, your Company increased the prepaid tariffs across all price points including unlimited plans as well as combo vouchers. All these initiatives are ARPU accretive, benefits of which are reflected in ARPU improvement from Rs 107 in Q4FY21 to Rs 124 in Q2FY22.

While all these tariff interventions are steps in the right directions and will help in improving the ARPU, however such changes are not material enough to solve the structural issue that the industry is facing. Tariff hike remains critical to revive the sector and pricing structure has to change where operators have the ability to charge customers for incremental usage. India has amongst the lowest ARPUs in the world despite having one of the highest data usage per subscriber. Your Company believes the market will be able to absorb further tariff hikes, which is essential to operators to generate reasonable returns on their capital employed and support future investments, including investment towards advance technologies.

While tariff hike remains critical to improve the overall industry health, your Company has undertaken several market initiatives to improve ARPU with focus on driving 4G/UL plan penetration. Your Company has been running several campaigns in select locations to incentivize 2G handset customers upgrading to 4G devices including cashback on monthly recharges, 0% Interest EMI Schemes on Device Financing and attractive offers on refurbished devices, in conjunction with OEMs and NBFCs.

As a part of Customer excellence drive, your Company continues to aggressively focus on digitalization of customer servicing as well acquisition across all touch points with a clear focus towards shift to digital. Your Company now has digital acquisition across major cities in India, for both prepaid and postpaid customers, including same day door step delivery and digital KYC processes, serviced through its dedicated delivery partners as well as own stores.

3. Focus on Business Services and new fast growing segments

Business Services will always remain a strength area for your Company given its long standing relationships with its enterprise customers and global know how of Vodafone Group, which provides strong platform for future growth in this segment. Your Company is well positioned in enterprise offerings across the industry verticals and will strive to further improve its position with focus on fast growing segment of IoT solutions, cloud offerings, carrier services etc.

Your Company is progressing ahead in its stated strategy of transformation from Telco to TechCo. The planned expansion of services beyond connectivity has seen good traction. Your Company has been working with partners and customers to build Private LTE solutions to drive Industry 4.0. In new business streams, Vi Business continues to maintain strong positioning in IoT offerings which is an emerging segment and has potential to grow multi fold in the near future amid Governments push towards ‘Digital India and ‘Smart Cities. With Vi Integrated IoT Solutions, Vi Business is the only telecom company in India to offer a secure end-to-end IoT solution, across industries, for Smart Infrastructure, Smart Mobility and Smart Utilities. Your Company has seen numerous deployments on Smart mobility, Smart Infrastructure solutions across FMCG, Manufacturing and Automotive sectors. The Integrated IoT solutions are powering EV ecosystem across the value chain of tracking, battery monitoring and charging infrastructure management.

Your Company is working on the cloud strategy through a combination of own assets and strategic partnerships in order to accelerate digital transformations for enterprises. The award winning digital experience offerings such as Vi App, Vi Business-Wireline & Vi Business-Mobility are allowing organizations to manage from anywhere and at any time with least manual intervention. Your companys technology leadership in IoT eSIM and Mobility eSIM has been globally recognized by Counterpoint in their L.E.A.D.E.R benchmark for eSIM ecosystem. Vi Business has also been recognized by Frost & Sullivan for Indian Cellular IOT Connectivity Service Provider Company of the Year 2022 and Indian SIP Trunking Technology Innovation Leadership Award 2022. Vi Business has been chosen as the preferred partner of choice for Internet of Things (IoT), SIP Trunk, Telecom Carrier (Mobile Access) and Managed Mobility Services in CIO Choice 2022, on the basis of an extensive Pan-India CIO referral voting process that spans across industry verticals.

4. Driving Partnerships and Digital Revenue streams

Your Company is aggressively executing its digital strategy through partnerships, with the objective to become a true integrated digital services provider. Your Company offers "best-in-class" content in partnership with several global and regional content aggregators. During the year, your Company launched Music service on Vi app for our entire base. The service has been launched in partnership with Hungama Music. With this integration, Vi users can now listen to music on Vi app free for 6 months, for both android users and IoS users. In another major initiative, your Company integrated Vi Movies & TV app content with Vi app to allow easier access without having to download multiple apps. With this integration, Vi users can watch movies, web series, over 400 Live TV channels on Vi app.

During the year, your Company has launched several digital offerings for its customers over and above content. Your Company partnered with Nazara Technologies a premiere gaming and investment firm to launch first gaming service, under Vi Games, accessible from Vi App by all Vi users. Your Company has also launched a new service - Vi Jobs & Education on the Vi App in partnership with "Apna" that offers free priority access for Vi customers to Indias largest job listing. Further, your Company has partnered with leading English learning platform ‘Enguru which gives free access to Vi customers to some of the interactive, gamified, industry specific self-learning modules. Vi Jobs & Education has also partnered with ‘Pariksha which offers the aspirants preparatory support for Central/State Govt. jobs.

On the back of all these digital initiatives, your Company has witnessed considerable growth in its Monthly Average Users (MAUs) on the digital app and expects to witness further acceleration in financial year 2022-23. The focus on platform capabilities to build a digital ecosystem with the partners for a differentiated experience will help drive customer stickiness as well as provide incremental monetization opportunities.

Your Company has thus been making significant progress on various strategic initiatives and continues to strive towards transforming from a pure play mobile operator to a truly integrated digital service provider. Your Company is thus committed to delivering best-in-class services to their subscribers and bridging the digital divide that separates urban from rural.

SIGNIFICANT CHANGES IN KEY FINANCIAL RATIOS BASED ON STANDALONE FINANCIAL

The key financial ratios are as under:

Particulars 2021-22 2020-21
Debtors turnover Ratio (number of days)1 23 23
Current Ratio1 2 0.47 GN=RIGHT>0.44
Debt Equity Ratio3 (3.11) (4.78)
Debt Service Coverage Ratio4 0.27 0.41
Interest Service Coverage Ratio5 0.38 0.53
Operating Profit Margin (%)6 (19)% (16)%
Net Profit Margin (%)7 (74)% (111)%
Return on Net Worth (%)8 NA7 NA7

1 Debtors turnover Ratio (number of days) = (Average trade receivables/ Revenue from operations)*Number of days during the period.

2 Current Ratio = Current asset/ Current liabilities (excluding Short term borrowings).

3 Debt Equity Ratio = Debt (excluding interest accrued but not due)/ Equity (Reduced mainly due to lower loss after tax incurred during the year).

4 DSCR = [Profit/(loss) before exceptional items and tax + Depreciation & Amortisation expenses (excluding depreciation on ROU assets) + Finance costs (excluding fair value gains/losses on derivatives and interest on lease liabilities)] / [Finance costs (excluding fair value gains/losses on derivatives and interest on lease liabilities) + interest capitalised + scheduled long term principal repayments (excluding prepayments)]. (Reduced mainly due to higher repayment of borrowings as per agreement).

5ISCR = [Profit/(loss) before exceptional items and tax + Depreciation

& Amortisation expenses (excluding depreciation on ROU assets) + Finance costs (excluding fair value gains/losses on derivatives and interest on lease liabilities)] / [Finance costs (excluding fair value gains/losses on derivatives and interest on lease liabilities) + interest

capitalised]. (Reduced mainly due to higher finance costs).

6 Operating Margin (%) = [Profit/(loss) before exceptional items and tax + Finance costs - Other Income] / Revenue from Operations.

7 Net Profit Margin (%) = Net Profit/(loss) after tax / Revenue from operations (Reduced mainly due to higher exceptional items during the previous year).

8 As the Net-worth is negative as on March 31, 2022 and March 31, 2021.

DISCUSSION ON CONSOLIDATED FINANCIAL RESULTS

Revenues

Revenue from operations for the Financial Year ended March 31, 2022 decreased by Rs 34,367 Mn and stood at Rs 385,155 Mn for Financial Year ended March 31, 2022 as compared to Rs 419,522 Mn for Financial Year ended March 31, 2021, primarily due to decrease in IUC rates effective January 1, 2021.

Other Income comprising of interest income, gain on investments in mutual funds and others stood at Rs 1,294 Mn for Financial Year ended March 31, 2022 as compared to Rs 1,742 Mn for Financial Year ended March 31, 2021. The decrease is mainly on account of decrease in interest income amounting to Rs 355 Mn, gain on investment in mutual funds by Rs 224 Mn which is partially offset by increase in others by Rs 131 Mn.

Operating Expenses

Total operating expenditure decreased by Rs 25,271 Mn from Rs 250,065 Mn for the year ended March 31, 2021 to Rs 224,794 Mn incurred for the year ended March 31, 2022.

Employee Benefit Expenses: Employee benefit expenses decreased by Rs 2,949 Mn from Rs 20,300 Mn for the year ended March 31, 2021 to Rs 17,351 Mn for year ended March 31, 2022 primarily due to reduction in head count.

Network Expense and IT Outsourcing Cost: Network Expense and IT Outsourcing Cost increased by Rs 2,244 Mn from Rs 95,938 Mn for the year ended March 31, 2021 to Rs 98,182 Mn for the year ended March 31, 2022 primarily due to increase in power and fuel expenses and repairs and maintenance-plant and machinery expenses to Rs 56,579 Mn and Rs 26,969 Mn for the year ended March 31, 2022 from Rs 55,385 Mn and Rs 25,407 Mn for the year ended March 31, 2021 respectively which is offset primarily by decrease in lease line and connectivity charges to Rs 4,650 Mn for the year ended March 31, 2022 from Rs 4,944 Mn for the year ended March 31, 2021.

License Fees and Spectrum Usage Charges & Roaming and Access Charges: License Fees and Spectrum Usage charges increased by Rs 693 Mn from Rs 41,295 Mn for the year ended March 31, 2021 to Rs 41,988 Mn for the year ended March 31, 2022.

Subscriber Acquisition and Servicing Expenditure:

Subscriber Acquisition and Servicing Expenditure, increased by Rs 2,034 Mn from Rs 17,677 Mn for the year ended March 31, 2021 to Rs 19,711 Mn for the year ended March 31, 2022 primarily due to higher amortization of cost capitalized.

Advertisement, Business Promotion Expenditure and Content Cost: Advertisement, Business Promotion Expenditure and Content Cost increased by Rs 1,916 Mn from Rs 7,875 Mn for the year ended March 31, 2021 to Rs 9,791 Mn for the year ended March 31, 2022 primarily due to increase in Advertisement and Business Promotion Expenditure.

Other Expenses: Other expenses decreased by Rs 5,498 Mn from Rs 14,044 Mn for the year ended March 31, 2021 to Rs 8,546 Mn for the year ended March 31, 2022 primarily due to reduction in Support service charges.

The composition of total operating expenses (Amount in millions and %age to total operating expenses) are as follows:

Earning before Finance Costs, Depreciation, Amortisation, Exceptional Items and Taxes (EBITDA)

The EBITDA has decreased by Rs 9,544 Mn from Rs 171,199 Mn for Financial Year ended March 31, 2021 to Rs 161,655 Mn for Financial Year ended March 31, 2022. EBITDA as a percentage of total Income increased to 41.8% compared to 40.6% for Financial Year ended March 31, 2021.

Depreciation, Amortisation and Finance Charges

The depreciation charge for the year has increased by Rs 1,556 Mn from Rs 145,013 Mn for Financial Year ended March 31, 2021 to Rs 146,569 Mn for Financial Year ended March 31, 2022. The amortisation charge for the year has decreased by Rs 2,098 Mn from Rs 91,372 Mn for Financial Year ended March 31, 2021 to Rs 89,274 Mn for Financial Year ended March 31, 2022.

Finance Charges for Financial Year ended March 31, 2022 increased by Rs 29,827 Mn from Rs 179,981 Mn to Rs 209,808 Mn, primarily due to increase in interest on deferred payment ob li gati on pu rsuant to AGR judgement du ring the year by Rs 16,168 Mn and increase in interest on deferred payment liability towards spectrum mainly due to availment of moratorium and increase in forex loss.

Exceptional Items

Exceptional Items for the year ended March 31, 2022 amounting to Rs 1,643 Mn comprises of (i) integration and merger related costs Rs 764 Mn, (ii) accelerated depreciation on network re-alignment / re-farming (137) Mn, (iii) Gain on investment property Rs 1,266 Mn and (iv) others (250) Mn.

Profits and Taxes

The loss before tax for the Financial Year ended March 31, 2022 stood at Rs 282,341 Mn as compared to a loss of Rs 442,534 Mn for Financial Year ended March 31, 2021. The loss after tax for Financial Year ended March 31, 2022 stood at Rs 282,454 Mn as compared to a loss of Rs 442,331 Mn for Financial Year ended March 31, 2021.

Capital Expenditure

During the Financial Year 2021-22, the capital expenditure (including capital advances and excluding RoU assets and Spectrum) incurred was Rs 36,503 Mn. Further to the above, the Company has incurred Rs 2,626 Mn towards Bandwidth.

Balance Sheet

The Gross and Net Block (including Capital Work in Progress and Intangible assets under development) stood at Rs 2,947,708 Mn and Rs 1,571,829 Mn respectively as at March 31, 2022. Investment in joint venture, associate and others stood at Rs 53 Mn (net of provision for impairment) primarily due to share of profit in joint venture. Other financial assets increased by Rs 21,969 Mn from Rs 126,684 Mn to Rs 148,653 Mn primarily due to increase in settlement asset and balances with banks. Other Assets decreased by Rs 6,746 Mn from Rs 226,442 Mn to Rs 219,696 Mn primarily due to decrease in advance tax which is offset by increase in GST recoverable and Costs to obtain a contract with the customers.

The paid-up equity share capital of the Company increased by Rs 33,834 Mn during the year pursuant to issuance of 3,383,458,645 equity shares on preferential basis to entities forming part of promoter / promoter group.

Other equity of the Company decreased from (669,634) Mn for Financial Year ended March 31, 2021 to (940,836) Mn for Financial Year ended March 31, 2022 mainly due to loss during the year Rs 282,454 which is offset mainly by increase in securities premium. As on March 31, 2022, the total equity stood at (619,648) Mn as compared to the total equity of (382,280) Mn for Financial Year ended March 31, 2021.

Total borrowings increased by Rs 106,074 Mn and stood at Rs 1,909,177 Mn as on March 31, 2022 primarily due to annual accrued interest addition on spectrum obligation, new short term loan obtained which is off-set by loan repayment during the year.

Other financial liabilities increased by Rs 24,337 Mn and stood at Rs 569,052 Mn for Financial Year ended March 31, 2022 primarily due to increase in settlement liability, increase in lease liabilities and increase in accrual towards One Time Spectrum Charges (OTSC) which is primarily off-set by decrease in payables for capital expenditure and decrease in Security deposits from customers and others.

Other Liabilities and Provisions increased by Rs 12,464 Mn from Rs 69,246 Mn as on March 31, 2021 to Rs 81,710 Mn as on March 31, 2022 mainly due to taxes, regulatory and statutory liabilities, deferred revenue and advance from customers.

Deferred Tax Liabilities as at March 31, 2022 stood at Nil as compared to Rs 22 Mn as at March 31, 2021. Deferred tax assets as at March 31, 2022 stood at Rs 60 Mn as compared to Rs 23 Mn as at March 31, 2021.

Cash Flow Statement

The cash generated from operations of Rs 173,870 Mn, proceeds from allotment of equity shares under preferential issue of Rs 44,997 Mn, proceeds from borrowings of Rs 27,500 Mn, proceeds from sale of investment property of Rs 1,870 Mn, interest received of Rs 586 Mn, net sale of current investments amounting to Rs 180 Mn and repayment of loan given to Joint Venture of Rs 8 Mn was primarily used for net repayment of lease liabilities and borrowings of Rs 150,038 Mn, payment towards capital expenditure (net of sale proceeds) Rs 58,882 Mn, payment of interest and finance charges Rs 27,997 Mn, payment towards Spectrum and Licenses - Upfront payment of Rs 1,035 Mn and placement of fixed deposits with banks having maturity of 3 to 12 months of Rs 30 Mn. Consequently, Cash and Cash Equivalents as at March 31, 2022 stood at Rs 14,532 Mn.

Human Resource Management

Your Companys people architecture has been built on the principles of being a consumer centric company with technology as the bedrock. The organization has equipped itself for high change agility, has embedded trust at the foundation of its people agenda, and has adopted digital as the first port of call for all solution building.

Health & Safety and Pandemic care

At VIL, Health, Safety and Wellbeing (HSW) are not just priority, these are our core values. We are committed to "not doing business by putting people at risk". Safety and wellbeing of our employees and our partners have remained an area of utmost focus for us in yet another unprecedented year of the pandemic. Significant efforts were made in extending all possible support to our employees, their families, our partners as the country was swept by the second wave of COVID-19. To ensure proactive management of the situation, war rooms were set up all across the country to facilitate connect with doctors, provide access to hospital beds, oxygen support and all other medical, emotional and financial assistance. Insurance schemes were upgraded to include new features and support from Home Care support agencies were also extended to ensure our employees, their families and partners were adequately covered for exigencies.

The safety of our frontline teams have been of particular focus for us. We have followed a cautious approach to opening our offices and geography specific decisions were taken keeping the ground realities in mind. Office attendance was staggered with only 20-25% daily attendance and with strict safety and hygiene precautions in place. This has helped us in safeguarding our team members and providing them with reassurance.

With regards to our Absolute Safety Rules and standards, we continue to walk the talk on our promise. Apart from our continued rigor on Health, Safety and Wellbeing priorities backed by a robust governance mechanism, we have also adopted a "Risk Based Approach" this year to ensure safety of our colleagues while they are at work. This risk based approach has helped us in providing sustainable risk mitigation measures for some of the critical high risk activities. In addition to this, HSW deep dive audits for all the premises and refresher training for all the @risk population has helped us in reducing the overall injury count by 50% in this financial year.

Inclusion

At Vodafone Idea, we realize that Diversity and Inclusion at the workplace helps foster an open and healthy work environment and is critical to our business strategy. We believe Women at various management levels bring plurality, diverse thinking, varied leadership styles and values. To build a diverse internal team we need to focus on creating a supportive ecosystem to hire, engage and retain women talent.

The continuance of the pandemic and working from home remained a challenge for our women colleagues as they had to juggle between work and personal responsibilities. Our constant connect with our women colleagues through small group discussions and pulse surveys, sensitization workshops with managers and leaders have allowed us to build a larger appreciation of the challenges and offer comfort to our women colleagues to shoulder various demands and be effective at work.

Enhancing women proportion in the organization continues to be our focus area. We focus on closely tracking the proportion of women in our external hiring initiatives. 25% of the external hiring was filled with women talent joining us in this financial year. In order to create a Company culture with leadership commitment towards gender inclusion, we have also introduced capability enhancement for women, gender sensitization workshops and employee assistance programs. As a part of our care initiative, we have specifically focused on maternity and return from maternity as important events in the life cycle of a woman employee. We have put in place an Employee Assistance Program (EAP) to provide timely support to our women colleagues during maternity and ensuring a smooth transition back to work for our returning mothers. A robust journey has been instituted which includes counseling of managers on the best ways to support a new mother and re-integrating them back to work. All these efforts have helped us improve our gender balance by 2% even in a difficult pandemic year.

Inclusion and inclusive culture goes beyond our agenda on women participation in our workforce. We consciously try to build an ecosystem and policy infrastructure that recognizes, enables and assures fair treatment to people with alternate sexual preferences.

Organisation Transformation

We are constantly evaluating our operating models to make them relevant, future fit, and lean. This year, we have strengthened our Operations by adding leadership bandwidth in some of our key geographies. We have also successfully augmented our distribution footprint by adding more zones and frontline staff across various markets to increase our market coverage and intensity of on ground delivery.

In line with our ambitions of being a Techco, we have also further strengthened our digital organization by making some

key design changes and infusing subject matter experts into the Digital Organization. The changes have helped us make our ways of working more contemporary and competitive, provide more enriching roles and career progression opportunities to our employees and curate propositions and experiences for our customers that are best in class.

Talent Management, Learning & Development

At Vodafone Idea we want to create Talent as a competitive differentiator. Building a Talent landscape that is fit-for- purpose & sets the stage for the future are important imperatives to deliver the competitive advantage. Towards this objective, key steps have been taken in strengthening our succession pipeline for critical roles. Another important aspect of our talent philosophy is to provide well-orchestrated and meaningful career opportunities for our employees. We have been able to establish our Internal Job Posting (IJP) platform as the first port of call for employees exploring career advancement opportunities. 39% of the total vacancies were closed through the IJP process and through the various internal talent moves, 55% our internal moves have resulted in our employees taking up bigger roles and responsibilities.

A key pillar of our talent strategy has also been to bring in fresh talent and provide them with enriching experiences to build them as successful professionals who will provide a strong pipeline for high impact roles in the future. In this financial year, we have on-boarded 300+ fresh talent from various institutes across the country for opportunities across Marketing, Enterprise, Technology, Distribution and Retail Operations.

Our learning delivery models have been transformed to provide capability building opportunities to our employees through a blended approach. A significant part of our capability initiatives were delivered over digital platforms so that all employees can access the programs from anywhere and learn at their own pace and time. Through partnerships, we have made a vast library of high quality programs available to our employees covering a wide variety of topics. Additionally, we have curated learning journeys for our teams to up weight business critical skills in the areas of Customer Experience, Design Thinking, Digital Marketing and Data Sciences. Our Digital mode of training has delivered 113,776 of total training hours covering 99% of our employee base.

We also leveraged our Virtual Instructor Led Training (VILT) programs to focus on building the capability of our frontline teams. Vi Level Next and Vi Stride are two flagship programs that are focused on enabling our frontline teams to deliver stronger results in the market.

Risk Management

The Risk Management framework of your Company ensures regular review by management to proactively identify the emerging risks, to do risk evaluation and risk prioritization along with development of risk mitigation plans and action taken to minimize the impact of the risk. The framework requires that the Risk Management Committee be periodically informed about risk minimization procedures adopted by your Company. These processes are also periodically reviewed by management. The various risks, including the risks related to the economy, regulation, competition, technology etc., are documented, monitored and managed efficiently.

Regulatory

Major regulatory developments for the period are:

1. Telecom Reforms Package

During September 2021, a wide-sweeping telecom Reforms package was announced by the Government covering structural reforms, procedural reforms and liquidity relief measures. Key steps announced by the Government are as below:

Structural Reforms- Non-telecom revenue excluded from definition of Adjusted Gross Revenue (AGR) on prospective basis.

- Bank Guarantees (BGs) requirement reduced by 80%. No requirements for multiple BGs - only one BG to be given.

- Interest rates on Delayed payments of License Fee (LF)/Spectrum Usage Charge (SUC) reduced from SBIs MCLR + 4% to MCLR + 2%; interest to be compounded annually instead of monthly; penalty and interest on penalty removed.

- No BGs required to secure instalment payments in future Spectrum auctions.

- Tenure of spectrum increased from 20 to 30 years in future Spectrum auctions.

- Spectrum acquired in future auctions permitted to be surrendered after 10 years.

- No Spectrum Usage Charge (SUC) on spectrum acquired in future auctions.

- No additional SUC of 0.5% for Spectrum sharing.

- 100% Foreign Direct Investment (FDI) permitted under automatic route.

Procedural Reforms- Spectrum auctions to be normally held in the last quarter of every financial year.

- Cumbersome requirement of licenses under 1953 Customs Notification for wireless equipment removed & replaced with self-declaration.

- Self-KYC (App based) permitted. E-KYC rate revised to One Rupee. Shifting from Pre-paid to Post-paid and vice-versa will not require fresh KYC.

- Paper Customer Acquisition Forms (CAF) be replaced by digital storage of data.

- DoT will accept data on a portal based on selfdeclaration basis for SACFA clearance for telecom towers. Portals of other Agencies (such as Civil Aviation) will be linked with DoT Portal.

Liquidity Relief Measures- Four years Moratorium in annual payments of dues arising out of the AGR judgement & spectrum purchased in past auctions before 2021, protecting the Net Present Value (NPV) of the due amounts.

- Option to pay the interest amount arising due to the said deferment of payment by way of equity.

- At option of the Government, convert the deferred payment due amounts to equity at the end of the Moratorium/Deferment period.

The Company has opted for four years moratorium on both AGR and spectrum dues and has also opted to pay the interest amount arising out of this deferment by way of equity.

2. Spectrum Auction Payments

The 2021 spectrum auction concluded on March 2, 2021 where VIL won 5 MHz in Tamil Nadu and 0.8 MHz spectrum in West Bengal service areas in 900 MHz spectrum band and 4 MHz in Karnataka, 1.4 MHz in Uttar Pradesh (East) and 0.6 MHz in Uttar Pradesh (West) service areas in 1800 MHz band.

Accordingly Company has made the upfront payments for the various spectrum assignments as per the NIA in March 2021 and August / September 2021 respectively.

3. Minimum Roll-out Obligations (MRO)

Basis a clarifications issued by DoT that roll-outs done under 900 MHz / 1800 MHz or 2100 MHz, will be valid/ counted towards rollout obligations of 2300 MHz or 2500 MHz.

The Company has got its roll-out completely validated and approved for 2300 MHz and 2500 MHz spectrum (won in 2016 auction) on the basis of roll-out done in 900 MHz/ 1800 MHz or 2100 MHz bands, and fulfilled its rollout obligation in 20 Licensed Service Areas.

4. 5G Trials

The Company was issued 5G Trial Licenses by the DoT on May 27, 2021 for six months that were subsequently extended for a period of another 6 months upto May 26 2022. In this period, the Company has successfully demonstrated 5G use cases meant for both enterprises and consumers at its approved locations of Gandhinagar and Pune in Gujarat and Maharashtra LSAs in the allocated spectrum bands of 3.5 GHz and 26 GHz.

These use cases pertained to various dimensions such as Connected Classroom, Cloud Gaming, AI VR 360 Camera, VR 360 Content Playback, Connected Ambulance, Smart Body Sensors, Smart Workplace, Smart Education, Smart Agriculture, etc., and were conducted in partnership with various OEMs/Solution Providers.

5. Unsolicited Commercial Communications (UCC) - TCCCP Regulation of TRAI

During Financial Year 2021-22, system for uploading bulk consents of the consumers was made live by all the telecom operators and it was successfully utilized by Principal Entities for uploading bulk consents of their consumers on the DLT platform. System for acquisition of consent digitally by Principal Entities, through DLT platform of telecom operators is in final implementation stage.

6. TRAI Direction on Tariff Offers

TRAI had issued direction dated September 2, 2021 directing all TSPs to ensure that (a) only the tariffs reported to TRAI are offered through their channel partner/ distributors/ retailers/ third party apps etc. and (b) all tariff offers comply with extant TRAI Regulations/ Directions/ Orders, etc where the TSPs name / brand is used for marketing /offering / selling / products and services, and that the responsibility of ensuring compliance of TRAIs regulatory guidelines /provisions shall remain with the TSP. The Company had submitted its compliance to TRAI on September 28, 2021.

7. TRAI Direction on provision of SMS facility to consumer to generate UPC irrespective of value of tariff voucher

TRAI had issued direction dated December 7, 2021 contending that some of the vouchers from TSPs did not providing SMS facility thereby hindering consumers from generating the Unique Porting Code (UPC) for facilitating MNP and thereby directed TSPs to enable for all mobile subscribers requesting for a UPC, the facility to send SMS to short code 1900, irrespective of the value of the tariff offers/vouchers.

This direction was challenged by the Company in Honble TDSAT, which passed an interim order dated December 24, 2021 directing TRAI not to take any coercive steps w.r.t. its direction dated December 7, 2021. This order was stayed by Honble High Court of Delhi, based on a writ application by TRAI, post which, the Company had complied with the said TRAI direction. Honble TDSAT decided the matter and issued final order dated March 10, 2022 dismissing the petition.

8. AGR matter

Application was filed by the Company in AGR matter in Honble Supreme Court seeking modification of the Honble Supreme Court Order dated September 1, 2020, to clarify that it does not bar DoT from considering submissions of the Company on manifest errors has been dismissed by the Honble Supreme Court on July 23, 2021.

Subsequently, on August 10, 2021, the Company filed a review petition with the Honble Supreme Court for considering to hear the modification application again and the same is pending for final disposal.

9. Data Protection

Based on Justice B.N. Srikrishna Committee report on personal data protection framework for India along with a Draft Personal Data Protection Bill (2018), the Government of India introduced a Personal Data Protection Bill 2019 (PDPB) in the lower house of Parliament (Lok Sabha) in December 2019. The PDPB (2019) was referred to a Joint Parliamentary Committee formed by the Lok Sabha for further deliberation. The Joint Parliamentary Committee Report was tabled in Parliament on December 16, 2021.

10. Intermediary Rules and Guidelines

The Government of India notified the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021 on February 25, 2021. These Rules are in two parts. Part I to be administered by MEITY broadly require that the intermediaries follow certain due diligence as prescribed and are required to publish privacy policy, Rules and Regulations and terms and conditions. They are also expected to remove any unlawful content as and when brought to their knowledge either through a court order or through a notice by appropriate government or its agency or suo moto. Also, where an intermediary collects information from a user for registration on the computer resource, it shall retain this information for a period of one hundred and eighty days after any cancellation or withdrawal of his registration. Part II pertains to the Digital Code of Ethics is applicable to publishers of news & current affairs content & online curated content and required. This will be administered by the Ministry of Information and Broadcasting and requires the publishers to adhere to the Digital code of Ethics laid down under the rules, follow a monthly disclosure requirement and also put in place a 3 tier Grievance redressal mechanism.

11. M2M Registration Guidelines

DoT has recently issued guidelines for registration of M2M Service Providers and WPAN/WLAN Connectivity Providers and registration has been opened on the Saral Sanchar portal for all interested entities w.e.f. March 7, 2022. In the guidelines, it has been envisaged that entities which are offering/providing the M2M services based on SIM/ LAN shall register as M2MSP and entities which use WPAN/WLAN technologies for providing M2M connectivity, operating in unlicensed spectrum, shall register as WPAN/WLAN Connectivity Providers.

12. National Security Directive

Considering the security concerns and for protection of Indias essential national security interests, the National Security Directive on Telecom Sector came into effect from June 15, 2021, under which licensees can only connect trusted products from trusted sources in their networks and seek permission of the designated authority for utilizing equipment not designated as trusted. The designated authority for this purpose is the National Cyber Security Coordinator.

License conditions have been amended for the implementation of this directive. A portal viz. Trusted Telecom Portal has also been put in place for upload of applications by TSPs and equipment vendors for carrying out the evaluation for the purposes of declaring trusted sources and trusted products.

This exercise is carried out through the operations arm of the National Security Council Secretariat called the Trusted Telecom Cell, which interacts with TSPs and Equipment Vendors on a day to day basis.

Under the said process, various sources and products have been declared as trusted by the designated authority. In other cases where the evaluation process is still underway, the authority has also granted one time exemptions after examination on a case to case basis so as to facilitate continuity in network expansion and address any constraints being faced by TSPs in the transition phase.

Opportunities, Risks, Concerns and Threats

Indian telecom operators are well poised to benefit from the compelling macro-economic backdrop, growth in smartphone usage and growing digital adoption. All the existing telecom service providers, operators have made significant investments towards expanding broadband network across the country. Due to lack of adequate infrastructure, the growth of wired internet has been restricted to major cities as a result of which wireless remains the preferred means of connecting to the internet. The increasing 4G coverage and low priced 4G services have led to significant increase in 4G users. However, there is significant headroom for 4G penetration (as a percentage of population) to improve further from 56% as of September 2021 (Source: GSMA Intelligence), as rest of India upgrades towards 4G. The growth in social media usage, rapidly increasing content consumption and growth in online commerce will continue to drive demand for broadband services.

The key strategic initiatives of your Company along with its competitive spectrum footprint across circles, significant network investments and customer affinity to its unified brand ‘ Ul , positions it well to benefit from these trends.

Your Company has several ongoing litigations and any adverse determination of these remains a risk. Your Company works with various local, state and central government agencies for specific permissions to operate its mobile licenses and is required to meet various regulatory/policy guidelines of the DoT and may be subjected to various regulatory demands, penalties/fines or increased cost of compliance. Your Company makes best effort to adhere to all such requirements. Meanwhile, your Company believes in sound corporate governance practices and believes that these litigations would be settled in due course in the best interest of all stakeholders.

The telecom sector is characterized by technological changes and competition from new technologies is an inherent threat. Your Company has a strong spectrum portfolio and robust network footprint and continues to invest in the new emerging network solutions to adapt to any future technological changes. Your Company has been deploying an array of 5G concepts and technologies such as Massive MIMO, DSR, Open RAN, Cloudification of core and edge cloud/deployment.

Your Companys business is dependent on key Network and IT equipment suppliers for management and continuity of its Network, IT and business processes. These networks may also be vulnerable to technical failures or any natural calamity. Your Company has robust network & IT security processes and disaster recovery plans. Your Company is in partnership with global leaders in Network equipment and IT services and enjoys very long standing healthy relations with all its suppliers.

There exists material uncertainty relating to your Companys ability to continue as a going concern which is dependent on its ability to raise additional funds as required, successful negotiations with lenders on continued support and generation of cash flow from operations that it needs to settle/renew its liabilities/guarantees as they fall due. As of date, your Company has met all its debt obligations.

Outlook

Your Company will continue its journey of becoming a truly integrated digital service provider through its several strategic initiatives as well as continue to make investments for expanding 4G coverage and capacity especially in its 17 priority circles and upgrade its networks towards 5G ready network. Your Company will continue to focus on improving ARPU by driving UL/4G penetration as well as digitalization of customer servicing and distribution channels with an aim to provide the best of customer experience to retail and enterprise customers. In Business Services, your Company will increasingly focus on new and fast growing segments such as Cloud services and IoT. To further drive the digital agenda, your Company will look for deeper integration opportunities with its partners using its platform capabilities to provide a differentiated telco++ experience and value for partners as well as customers. Your Company will look to scale up its digital and content offerings with the intent of monetization.

Your Company will remain focused on providing superior data and voice experience and building a differentiated digital experience with focus on increasing 4G subscribers. Your Company successfully completed first tranche of fund raising in the form of preferential equity contribution of Rs 45 billion from the promoters. Your Company will also continue to actively engage with lenders and investors for further fund raising. All these initiatives coupled with the significant liquidity provided by the Government reforms package and the recent tariff hikes will enable your Company to make network investments and compete effectively to improve its competitive position.

Cautionary Statement

Statements in the Management Discussion and Analysis describing the Company?s objectives, projections, estimates, expectations may constitute a "forward-looking statement" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company?s operations include economic conditions affecting demand/supply and price conditions in the domestic markets in which the Company operates, changes in the Government Regulations, tax laws and other statutes and other incidental factors.