Vodafone Idea wants to triple the money it makes from its users, but it will take more than hope and prayers to achieve it

• Vodafone Idea’s Ravindar Takkar wants to triple the money that the telco makes from its users, over the next three to five years.
  
• However, the telco is the worst-placed in the Indian telecom industry in this regard.
  
• Even in its heyday, Vodafone India managed an ARPU of just ₹205, considerably lower than Takkar’s ambitious target.
  
• It remains to be seen if the advent of 5G will be the lifeline that Vodafone Idea needs.
  

For a brief, very brief time Vodafone Idea was the biggest telecom player in India - right after the merger. But Jio did not allow them to enjoy the spot as its entry changed the rules of the game – effectively taking away the margins and earnings of the entire sector along with subscribers.

Before 2016, 1GB of 3G data cost as much as ₹400. Reliance Jio brought it down by nearly 84 times — as 1GB 4G data at an effective price of ₹4.75, along with unlimited voice calls and SMS.

Six years since, Vodafone Idea has fallen into a distant third player in terms of subscriber numbers and its debt and liabilities too swelled.

In time, the competitive intensity has also cooled and now it wants to get back into the game by improving earnings from its customers.

Vodafone Idea’s managing director and chief executive officer, Ravindar Takkar, says he wants to make thrice as much money from his users, than he does today.

"All telecom operators want to increase their ARPUs, and Vodafone Idea needs it more than others. It can do this by increasing tariffs or data usage,” Mahesh Uppal, telecom analyst and director, Com First India told Business Insider India.

Vodafone Idea’s current average revenue per user (ARPU) stands at ₹124, and Takkar wants this to increase to ₹350-400 in the next three to five years.

Vodafone Idea is not alone in wanting to increase tariffs, which gives it the room it needs to try to grow its revenue without losing subscribers.

“There was a time when some operators were not keen to raise tariffs. That has changed, and there is no longer an unwillingness to increase rates,” said Uppal.


For comparison, in its heydays, Vodafone India’s ARPU, just before the launch of Jio, was at ₹205. Its significant other, Idea, had an ARPU of 144.

Airtel, the strongest of the lot even today, had an ARPU of ₹194 in the same period.

Fast forward to today, this is where the three telcos stand when it comes to the money they make from each user. Also, Jio’s advent also coincided with 4G services whose network and spectrum costs are higher than that of 3G, thinning their overall margins.

Vodafone Idea needs more than hope and prayers to increase its revenue

Vodafone Idea has been looking to raise ₹25,000 crore since 2020. It managed to raise ₹4,500 crore earlier in April this year, and new reports suggest that it could receive another ₹20,000 crore soon.

But the telco needs more than that, and hope and prayers to increase revenue.

One of the rays of hope on offer could be 5G services. 5G spectrum auctions are expected to take place in the next few weeks, and if the telco manages to raise ₹20,000 crore in time, it could be used towards scooping up the necessary 5G spectrum.

Vodafone Idea has previously demonstrated its 5G-readiness, but proper network testing is only possible after the spectrum auctions take place.

Two-faced challenge at Vodafone Idea’s doors

Despite Takkar’s ambitious target to reach ₹350-400 ARPU levels, Vodafone Idea has its task cut out. It faces not one, but two challenges wrapped in the same cloth – subscribers.

For a long time now, Vodafone Idea has been losing millions of subscribers every month. In fact, since the beginning of 2020, Vodafone Idea has lost 72 million subscribers. Its rivals, Airtel and Reliance Jio, have made merry, splitting these subscribers amongst themselves.


Despite its attempts, Vodafone Idea has been unable to stem the loss of subscribers. Out of the 27 months since January 2020, the telco has lost subscribers in 25 months.


To make matters worse, Vodafone Idea also has the worst 4G subscriber rate – less than half of its subscribers use 4G.


A 4G subscriber is more valuable than a 2G or 3G subscriber, since 4G plans cost more.

However, in the case of Jio, this does not directly reflect in its ARPU numbers since it also offers ultra-low-cost 4G plans to its JioPhone users.

To overcome this challenge and to substantially increase its revenue, Vodafone Idea not only has to stem the loss of subscribers, but also convert more of them to 4G from the legacy 2G network.

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