scorecardVI betting on tariff hike as it lost over $10 million every day in Q1 FY23
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VI betting on tariff hike as it lost over $10 million every day in Q1 FY23

VI betting on tariff hike as it lost over $10 million every day in Q1 FY23
Business5 min read
  • Vodafone Idea today told analysts that another round of tariff hikes is likely before the end of 2022.
  • The telco also needs a tariff hike boost more than its rivals Airtel and Jio do, as it struggles to retain subscribers and its current ARPU levels are much lower than those of its rivals.
  • The telco lost 15 million subscribers and the gap between its total and active subscribers is increasing too.
India’s third largest telecom provider Vodafone Idea today said that another tariff hike is possible before the end of 2022 as it looks for a margin boost to improve its liquidity.

In an analyst concall today, Vodafone Idea’s CEO Ravinder Takkar said the “time is right to think about a further price hike”.

“Tariff hike environment is right and we won’t hesitate to take leadership in hiking prices,” Takkar said.

“Customers have taken November tariff hikes very well. Almost all of it has flown to our ARPU numbers. Another tariff hike is possible by the end of the year,” he added further, noting that average revenue per user or ARPU has increased consistently from ₹104 a year ago to ₹128 now.

Even as it is earning more from its customers, it has lost 15 million subscribers during the same period. While its revenue grew nearly 14% to ₹10,407 crore in the first quarter as compared to last year, it posted a massive net loss of ₹7,297 crore.

The gap between its total and active subscribers is also widening, suggesting that more users than before do not have an active plan.

Subscriber churn remains a big problem – Vi is betting 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 subscriber stickiness.


The only positive, though, is that the number of 4G subscribers have increased, from 113 million a year ago to 119 million now. Still, this is less than half of Vodafone Idea’s total subscriber base.


Consumer engagement is falling, too

What should also concern Vodafone Idea is consumer engagement on its platform, which has declined both in terms of voice as well as data consumption.


5G will likely be at a premium to 4G, but rollout unknown

Thanks to its liquidity concerns, Vodafone Idea’s bids in the recently-concluded 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 committed to any particular launch date for 5G services, yet. Its rivals Airtel and Reliance Jio are likely to launch their services in this very month.

Vodafone Idea’s financial metrics at a glance:

Particulars

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

Net margin

-70%

-64%

-80%

ARPU

₹128

₹124

₹104


Source: Company reports

The telco also lost over $10 million a day during Q1 FY23 – largely due to finance costs. Its limited resources have forced the telco to focus investments in its core circles and reduce capex as much as possible.

This is evident from the fact that Vodafone Idea has undertaken refarming 2G and 3G spectrum to 4G to minimize costs and enhance its capacities.

Takkar also said he hopes 5G will be at a premium to 4G, but that would also likely mean users will get higher data allowances to make up for it.

While the company underlined that the ₹4,940 crore equity infusion by its promoters shows they are confident about its prospects, it refrained from revealing any information about future fundraising plans.

$IDEA.NSE the stock still looking weak until below 9.5. unless it crosses the resistance one needs to be watchful.

— (@TrendonomicsHD) August 04, 2022]]>

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