Vodafone idea's plans to increase average revenue per user (ARPU) through multiple rate increases after the general election could prove to be a difficult task price-sensitive customersanalysts said.
From a recent study conducted by BofA securities showed that 42% of Vi users are averse to sharp rate increases.
“According to the survey data, Vi users are price sensitive and 42% are not comfortable with (upcoming) higher price plans and could switch to a lower price package or close the secondary SIM (Vi mobile connection) altogether,” BofA Securities said in a research note, adding that a third of Vi users surveyed were comfortable with an increase of up to 10%.
According to the study, only 12% of subscribers use Vi as their primary mobile phone connection, while 53% use Trust Jio and 35% usage Bharti Airtel as their primary SIM cards.
In contrast, only 25-29% of Bharti Airtel and Jio customers surveyed are averse to a 20-25% tariff hike.
Vi's CEO Akshaya Moondra recently said that the next round of price increases would not be high at entry level, but would cause customers who use more data to pay higher rates. This is because Vi management believes that unlimited tariff packages are not appropriate and that users with higher consumption levels should be charged more, he said.
Currently, price-sensitive 2G users constitute about 42% of Vi's user base, much more than 28% for Bharti Airtel. Jio only has 4G and 5G users.
Nuvama institutional shareswhich participated in a meeting with Vi leadership earlier this month, said the telco's management is looking to continuously upgrade subscribers from 2G to 4G, along with multiple tariff increases in the coming years to improve ARPU and annual operating income (Ebitda) to double to Rs. 35,000 crore by 2025-2026, which could help tackle the upcoming crisis debt obligations.
Vi's ARPU rose 0.7% sequentially to Rs 146 in the March quarter, helped by higher prices for entry-level plans in some markets and the addition of 4G data subscribers.
The telecom joint venture between British companies Vodafone and that of India Aditya Birla Grouphowever, has downplayed concerns about the potential consequences SIM consolidation following a possible 20-25% tariff hike following the parliamentary polls, saying the size and impact of dual-SIM consolidation has gradually diminished whenever price corrections or increases have occurred in previous rounds.
SIM consolidation is happening when consumers throw away multiple SIM cards – keeping only their primary mobile connection – or make new choices for their favorite telecom brands after a series of price increases. This often causes a decrease in the number of mobile connections on the market.
Having recently raised over Rs 20,000 crore through equity financing, Vi is in talks with banks and financial institutions to lend up to Rs 25,000 crore and arrange another Rs 10,000 crore through non-fund based facilities.
Vi's targeted funding of Rs 50,000-55,000 crore will be used as capital expenditure over the next three years to increase 4G coverage, 4G capacity and achieve greenfield 5G rollout in key markets. This is crucial for the cash-strapped telco's survival and its ability to compete with Jio and Bharti Airtel, which have launched pan-India networks. 5G networks.
