- Vodafone Idea told analysts today that another round of tariff hikes is likely before the end of 2022.
- The telco also needs more of a rate hike than its rivals Airtel and Jio as it struggles to retain subscribers and current ARPU levels are much lower than its rivals.
- The telco lost 15 million subscribers and the gap between its total and active subscribers is also widening.
India’s third-largest telecom provider, Vodafone Idea, said today that another rate hike is possible before the end of 2022 as it seeks a margin increase to improve its liquidity.
In an analyst conference today, Ravinder Takkar, CEO of Vodafone Idea, said “the time is right to think about further price hikes”.
“The environment for rate hikes is good and we will not hesitate to lead the way in hiking prices,” Takkar said.
“Customers have weathered the November rate increases well. Almost everything has flown to our ARPU numbers. Another rate increase is possible by the end of the year,” he added, noting that the average revenue per user or ARPU has consistently increased from £104 a year ago to 128 now.
While it earns more from its customers, it lost 15 million subscribers over the same period. While its first quarter revenue grew nearly 14% to 10,407 crore compared to last year, it posted a huge net loss of ₹7,297 crore.
The gap between the total number and active subscribers is also widening, suggesting that more users than before do not have an active subscription.
Subscriber churn remains a big problem – Vi bets on value-added services to improve stickiness
For now, Vodafone Idea is betting on its partnership with Rakesh Jhunjhunwala-backed Nazara Tech for online gaming and other streaming services like Netflix, Amazon Prime Video, Hotstar, Zee5, and others to maintain the subscriber stickiness.
The only positive, however, is that the number of 4G subscribers has increased from 113 million a year ago to 119 million today. Yet this is less than half of Vodafone Idea’s total subscriber base.
Consumer engagement is also declining
What should also concern Vodafone Idea is consumer engagement on its platform, which has declined in terms of both voice and data usage.
5G will probably be more expensive than 4G, but rollout unknown
Due to liquidity issues, Vodafone Idea’s bids in the recently closed 5G spectrum auctions were 2.3x and 4.6x lower than its rivals Airtel and Reliance Jio, respectively.
To make matters worse, the company has not yet committed to a specific launch date for 5G services. Its rivals Airtel and Reliance Jio are likely to launch their services this month.
Vodafone Idea’s financial statistics at a glance:
|Particularities||Q1 FY23||Q4 FY22||Q1 FY22|
|Revenue||₹10,407 crore||₹10,229 crore||₹9.144 crore|
|Net profit||-₹7,297 crore||-₹6,561 crore||-₹7,319 crore|
Source: Company Reports
The telco also lost more than $10 million a day during Q1 FY23 – largely due to borrowing costs. The limited resources have forced the telco to concentrate investments in its core circles and reduce capex as much as possible.
This is evidenced by the fact that Vodafone Idea has undertaken to convert the 2G and 3G spectrum to 4G in order to minimize costs and increase capacity.
Takkar also said he hopes 5G will be more expensive than 4G, but that would likely also mean users will be given higher data caps to make up for this.
While the company emphasized that the 4,940 crore equity infusion by its promoters demonstrates confidence in the prospects, it refrained from disclosing information about future fundraising plans.
$IDEA.NSE’s stock still looks weak below 9.5. unless it exceeds the resistance, one must be vigilant.
— (@TrendonomicsHD) 04 August 2022
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