With top executives at Vodafone Idea Ltd (Vi) indicating it could be the first among the three private telecom players to raise tariff, analysts said the cash-strapped company will need others to join in or risk losing more customers.
Vodafone Idea’s chief executive, Ravinder Takkar, said in October that the telco will not shy away from raising prices and will set a precedent. This, even as it continues to lose millions of wireless customers every month, while rivals Reliance Jio Infocomm Ltd and Bharti Airtel Ltd add more users.
According to Telecom Regulatory Authority of India (Trai) data, Vodafone Idea lost 1.2 million wireless subscribers in August, shedding customers for the 10th straight month. But the loss was lower than the previous months hit by the covid-led disruptions.
Though Vodafone Idea and Bharti Airtel agree prices of voice and data services are unsustainable, and their average revenue per user (Arpu) needs to go up to ₹200 initially, and to ₹300 eventually, analysts said both must raise tariffs around the same time.
“Indian tariffs remain unsustainable; they need intervention… not just for us, but for the overall health of the sector. We all know Vodafone needs it (tariff hike) and we need it—everyone needs it to be able to have more money to put into networks, lay fibre, get into 5G and for auctions,” Sunil Mittal, chairman, Bharti Enterprises, said in an interview.
Mittal said affordability will not be a concern even after an increase as pricing in India will remain the cheapest in the world, adding that the current rates are below the input cost.
At best, Vodafone Idea can increase tariffs in a few circles where the gap between the quality of its network and that of the competition is minuscule or in markets where the telco has not lost many subscribers yet. However, a pan-India hike will only be possible if Airtel follows suit, said Rajiv Sharma, head of equity research, SBICAP Securities.
“On a standalone basis, Vi cannot sustain a tariff hike as it may end up losing more subscribers. Tariff hike has to be on an industry level (all three players raising within 45 days) and, if not, then it may have to roll back the increased prices due to acceleration in subscriber loss,” said Sharma.
A tariff hike will also have to be supported by improvements in the quality of the network that would retain high-paying customers, which has been Vi’s focus.
Despite a loss in overall wireless customer base in August, Vodafone Idea added 4.6 million mobile broadband subscribers, the highest among all telcos, as it continues to convert a large number of its 2G customers to higher-paying 4G users.
“Tariff hike could lead to loss of subscribers if Vodafone does not invest in infrastructure and network to improve its services,” said a telecom analyst, requesting anonymity.
If one goes by the numbers, Airtel has been adding towers to its network to improve the quality of services, while Vi has been reducing them. “Data volume has risen more than 50% for Airtel in the past year versus Vodafone, which has seen a 25% growth,” the analyst said.
