Vodafone Idea MD & CEO will work on no-salary basis for three year tenure - Prime Insights - Business Magazine

Vodafone Idea MD & CEO will work on no-salary basis for three year tenure

Vodafone Idea MD & CEO will work on no-salary basis for three year tenure

  • Tough economic times can undo even the best of individuals and companies as goes the ancient Chinese proverb “Never trust your future, however rosy it might seem”. How right these words are. Who could have predicted that a time like this will come as that of Coronavirus? The world went through so much in the 20th century, like the Spanish Flu, two world wars, atomic bombing of Japan, Cold War, the collapse of the Soviet Union etc. and perhaps the most significant economic test of all time, the Great Depression.
  • Just recently, in the 21st century, the Western world came through the most challenging financial test, with the 2008 economic collapse. Stalwart companies like Lehmann Brothers collapsed just like a pack of cards. The economic recession of 2008 and the subprime crisis displayed the significance of the importance of saving for a bad day and the importance of living within one’s means. So, in this scenario, the telecom giant Vodafone also did not get spared. Its Indian subsidiary Vodafone Idea announced that its CEO & MD Ravindra Takkar would not receive any salary for his tenure of three years.

Perspective

  • Vodafone is one of the giant telecom conglomerates which is headquartered in London, UK. It has a registered office in Newbury, UK. It has a huge subscription base at about 313 million and is currently fourth in the list of all-time subscribers, trailing China Mobile, Vodafone Idea and Bharti Airtel. Till to date, Vodafone owned networks are in twenty-four nations, and network partners in forty-one countries. Vodafone Global Enterprise gives IT services to corporate clients in more than one fifty nations. The firm commenced in 1982 as Racal Electronics and later switched its name to Vodafone. Its founders are Gerry Whent and Ernest Harrison. But, you must be wondering why Vodafone Idea is in a loss, after all. From, being a star boy of the telecom industry, the firm today is struggling for survival. The paramount reasons can be listed as follows.

1) Very high operating costs

  • Ever since, Jio has entered the market, with its dirt cheap rates, which are possibly the lowest in the world, the firm is struggling to maintain its profits. To give you an indication, 1GB of internet 4G data costs 0.26 USD. Consider this that the corresponding figure for the UK, is 6.66 USD and in the USA, it is 12.37 USD. The average worldwide is 8.53 USD. Jio was able to do this successfully since its parent firm Reliance has a lot of cash. But unfortunately, the airwaves in India are among the most expensive in the world. This pushes up operating costs tremendously for other players. To tackle Jio, Vodafone announced the merger with Aditya Birla’s Idea. However, instead of improvement in circumstances, the firm lost around 115 million subscribers last year. 

2) Transition to 4G

  • Another big issue confronting Vodafone Idea, is the difficulty in adopting 4G transition. However, unlike 4G adopted by Jio, which consists of Voice over LTE, Vodafone Idea is still using traditional technology for future calls. So, Jio has gained a considerable lead regarding call quality, and expenses are much lower. Additionally, Jio is a pioneer in giving free phone calls, since it is combined with 4G data pack. Not only this, the integration of Idea and Vodafone hasn’t been out of issues either. Data transfers are very slow, coverage is inadequate, multiple outages, and there are frequent call drops. Due to all these reasons, the average revenue per user for Vodafone Idea is among the lowest in the industry, about Rs 108. The corresponding figure for Airtel and Jio is Rs 129 and Rs 124. 

Latest Happenings

  • The more bad news is there in the offing for Vodafone Idea. It’s MD and CEO Ravinder Takkar, will not receive any compensation for three years. As per the Annual General Meeting on 30th September, which was twenty-fifth, it was decided that the firm will bear the expenses, which have been done by the CEO, for the firm’s business. Mr Thakkar was appointed as the Chief Executive Officer and Managing Director, after the resignation of its previous CEO, Balesh Sharma. As per reports, Balesh Sharma was given a compensation of Rs 8.59 crores.
  • The firm said in an official statement that it would not bear any sitting fees of Mr Thakkar, for attending the meetings of the Board of Directors. Vodafone Idea will also acquire approval of the shareholders regarding the appointment of Mr Ravindra Thakkar, at the Annual General Meeting. The firm will also take the support of the shareholder, for increasing its borrowing limit to one lakh crores from twenty-five thousand crores. The telecom giant is in complete disarray, financially. It has outstanding due, of Rs 58260 crores till the financial year 2016-2017. The firm has paid a colossal amount of Rs 7854 crores to the Telecom Department. The subscriber base of the firm has reduced to 31 crore customers from forty-three crore mobile subscribers. 
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  • Conclusion
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  • In this blog, readers will come to know how a fantastic firm like Vodafone Idea, fell from grace. It’s MD and CEO has agreed to work without a salary for three years. The terms and conditions are very stringent, and the firm is expecting that it will tide over the tough time. So, the successive year is going to be very crucial for the firm, in terms of profitability and long term future. So, let us wait and observe all the happenings. 
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