Highlight
- Telecom operator Vodafone Idea Ltd says industry continues to run at low prices
- Aditya Birla Group and Vodafone Group’s joint venture got a new lifeline last year
- The government had given a relief package to the sector
Telecom operator Vodafone Idea Ltd says the industry needs to increase mobile tariffs at regular intervals as the sector is still operating at low prices and the revision will allow it to generate reasonable returns and support future investments . The Aditya Birla Group and Vodafone Group joint venture, which got a new lifeline after the government gave a relief package to the sector last year, said the revenue per user is lower than historical trends.
All three private telecom operators – Reliance Jio, Bharti Airtel and Vodafone-Idea Ltd (VIL) hiked charges for data last year, arresting the fall in average revenue per user (ARPU). Despite this, “the industry is still operating at unsurprisingly low tariffs”, VIL said in its latest annual report. “India continues to have the lowest tariffs globally, while the proliferation of unlimited data bundles has made India one of the highest data usage (per subscriber) in the world,” it said.
Despite consumers getting more value in terms of unlimited voice and daily data allowances compared to five years ago, ARPU levels remain low compared to historical trends. The firm said, “Thus the company believes that the industry will have to increase tariffs at regular intervals, which is necessary for operators to generate reasonable returns on their capital and to support future investments including new technologies.” “
VIL had 2438 million customers as on March 31, 2022, of which 11.81 million were 4G users. The company said the Supreme Court has allowed payment of statutory dues over the past 10 years, with the government announcing a relief package for the industry in September 2021 to address the liquidity challenges facing the telecom sector.
Post this, “The company begins to see improvements in various operating KPIs, including leading the league table of voice and data experiences offered to customers. The pace of decline in subscriber numbers has also slowed somewhat Done,” it noted. The firm is currently in discussions with lenders and investors to secure the required equity and/or debt funding that will enable it to restart the capex cycle and move towards a growth journey in line with its long-term strategic intent.
In the recently concluded spectrum auction, the company acquired 5G spectrum in its priority circles, which covers 98 per cent of its revenue base, which will strengthen its competitive position. It added, “The integration of the industry to three large private operators and one government operator, positions the surviving operators well to benefit from the growth opportunities behind India’s digitization trend.”
The total tele-density for India stood at 83.1 percent as of March 2022, indicating that there is still a proportion of the population that has yet to start using mobility services. This is especially true for rural areas where tele-density is still low at 57.9 per cent, which remains a significant opportunity for Indian telecom operators.
“The company is taking appropriate steps to further augment its revenue and thereby reduce losses/making profits by following a well-defined strategy,” the annual report said. VIL said that its priority is to improve the ARPU. “During the year, the Company has made several tariff interventions especially effective from November 25, 2021, the Company has increased prepaid tariffs at all price points including unlimited plans as well as combo vouchers. All these initiatives are ARPU accretion , whose gains are reflected in this. ARPU improved from Rs 107 in Q4 FY21 to Rs 124 in Q2FY22.”
“While all these tariff interventions are steps in the right direction and will help improve ARPU, such changes are not sufficient to address the structural issue that the industry is facing,” it said. The company said the tariff hike is crucial to revive the sector and the pricing structure has to be changed where operators have the ability to charge customers for incremental usage. Despite having one of the highest data usage per customer, India has one of the lowest ARPUs in the world.
The company said it believes the market will be able to absorb further tariff hikes, which are essential for operators to generate reasonable returns on their capital and support future investments. “While tariff hikes remain critical to improving the overall health of the industry, the company has taken several market initiatives to improve ARPU,” it added.
“As a part of its customer excellence campaign, the company is aggressively focusing on acquisitions across all touch points with a clear focus towards transition to digital along with digitization of customer service.” The telco now has digital acquisitions across major cities in India, for both prepaid and postpaid customers, including same day doorstep delivery and digital KYC processes, serviced through its dedicated delivery partners as well as through its stores.
Read also | Vodafone Idea defers payment of AGR dues of Rs 8,837 crore, option to pay interest through equity