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The global economy recorded a healthy growth of 3.6% in 2018. During the second half of the year, however, the global economy lost some momentum, mainly on account of the increased trade frictions between the US and China, and the tightening of financial conditions. International Monetary Fund (IMF) expects growth to decelerate to 3.3% in 2019 and its projections suggest that all three major engines of the global economy, viz. US, China and Euro area are likely to decelerate in 2019. On the positive side, however, IMF expects world economic output to recover and grow at 3.6% in 2020.
Of late, there have been a few growth-supportive factors such as the announcement of economic stimulus in China and halt to the process of monetary policy tightening in developed countries. But the business sentiment has become somewhat clouded with challenges arising from the apparent setback to the US-China trade talks, the spread of trade frictions to technology sectors and the increased intermingling of economic policies. These challenges signal that global commodity prices could be under pressure.
Indian economy exhibited mixed record in the just concluded fiscal. GDP growth slowed from 7.2% in FY18 to 6.8% in FY19. Sub-par rainfall in 2018, tight financial conditions faced by the non-banking financial sector and moderation of external demand were the key challenges faced by the economy. Consumption growth declined during the second half of the year, but there were some signs of revival in the investment cycle, as the rate of gross fixed capital formation improved from 31.4% of GDP in FY18 to 32.3% in FY19.
Macroeconomic stability indicators broadly maintained their health. Low inflation has created the space for monetary policy easing, which will also help support growth revival. The fiscal deficit target for FY19 was adhered to, despite a shortfall in tax revenues. While the current account deficit was high at 2.6% of GDP during the first three quarters of FY19, the softness in international oil prices portends its narrowing in the coming quarters. Following the resounding political mandate for the ruling Government, expectations of further economic reforms and impetus to large infrastructure investments have been reinforced. These are reflected in strong inflows in the capital market, taking equity indices to record levels in the weeks following the general elections.
India''s medium-term growth prospects continue to be robust. Significant reforms undertaken in the recent years such as GST and insolvency code would raise India''s growth potential in the coming years, amplifying the effect of the long-term structural cornerstones of the Indian growth story such as demography and urbanization. In the near-term, however, uncertainty over the forthcoming monsoon season and the heightened global risks present headwinds for FY20. Accordingly, the outlook for the Indian economy in FY20 is one of cautious optimism at this juncture.
Your Company''s Performance
Effective August 31, 2018, Vodafone India Ltd. merged with your company leading to the creation of Vodafone Idea Limited, a partnership between two strong promoters Aditya Birla Group and Vodafone Group.
Your Company is now one of India''s leading telecommunications company offering voice, data, enterprise services and several other value added services (VAS), including short messaging services, digital services, content, and enterprise solutions. Your Company not only has the highest subscriber market share of 33.7% with 333.6 million active subscribers as of May 31, 2019, it is also the market leader in the growing enterprise segment services such as IoT.
The Indian telecom operators continue to operate in tough market conditions as competitive pressures forced operators to offer pricing plans, which are the cheapest in the world. This, coupled with massive investment requirements for expansion of broadband coverage and capacity has significantly worsened the existing financial stress in the Indian telecom sector overall and further undermined the position of all operators. Hence, pricing revival is now imperative for the long term sector health.
While the operating challenges remain, the consolidation in the industry has resulted in the creation of three large private and one public sector operator who are poised to benefit from the long term sector opportunities with rising broadband penetration and ever-increasing data demand. Your Company with its largest spectrum portfolio, a nationwide network of sites and optical fiber, wide distribution reach and strong customer affinity for its two brands - Vodafone and Idea, is very well positioned to be successful in this new, consolidated marketplace.
Your company is focused on accelerated integration of erstwhile entities with a very clearly defined strategy, having no dependencies on external factors. The outcome of exhaustive planning is a well-defined five-pillar strategy - (i) accelerated execution integration (ii) prioritizing investment in profitable areas, (iii) driving ARPU up with simplification and up selling, (iv) focus on partnerships to drive value and (v) strengthening the balance sheet. This forms the blueprint basis which several strategic initiatives have been undertaken to improve revenue, profitability and competitive position in the marketplace. Within just seven months of the merger, your Company has already achieved several milestones, well ahead of the expected timeline and is on track to deliver the guided synergies envisaged at the time of the merger.
Your Company has also successfully closed, India''s largest rights issue offering of Rs. 25,000 crores with strong demand from existing and new shareholders.
With industry consolidation now over, we believe that all existing operators are well placed to benefit from the several opportunities ahead. Customer needs continue to evolve with higher demand and consumption of both voice and data.
India''s young population is spearheading this growth via increasing social media usage and consumption of content, through both video and audio apps. Further, rural penetration is still at a relatively low level of 57.1%, indicating nearly 300-400 million Indians are yet to adopt mobile services and join the ongoing digital revolution.
In the enterprise domain, the rapid adoption of new-age technologies - IoT, Cloud, Artificial Intelligence etc. are opening a new world of opportunities for telecom operators. Likewise, the Government''s thrust on Digitalization via strategic programs such as Digital India, Smart City and Bharat Net require robust nationwide broadband connectivity for seamless delivery and execution, enhancing prospects of the telecom sector overall.
Your Company continues to focus on diligent execution of its stated strategy to optimize the opportunities ahead. With its strong spectrum portfolio, nationwide network footprint, aggressive broadband investments and complementary brands - Vodafone and Idea, your company is well placed to benefit from these trends.
Kumar Mangalam Birla