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Vodafone Idea<\/a> has 137 million data subs with 116 million being on 4G networks out of its total 254 million subscribers. Its 2QFY22 mobile Arpu increased 5% QoQ and subscriber loss decelerated, to 1.4 million decline.
Following Bharti Airtel<\/a>, Vodafone Idea raised tariffs by 20%. Its price plans are now similar to Airtel.
VIL’s ARPU, which stands at a mere Rs109-- 40% below Bharti Airtel-- given the higher proportion of customers on lower base plans, could see a big push, provided it doesn’t see a huge market share loss.
Vodafone Idea’s base plan has now increased to Rs 99, compelling consumers to recharge to higher plans, offering a huge push to ARPU. “However, this may result in further consolidation of dual SIM cards, increasing churn,” Motilal Oswal<\/a> said.
“The hike should increase ARPU to INR128 v\/s INR109 at present. The high operating leverage, given the low existing EBITDA margin of a mere 17% v\/s Bharti’s 49%, should drive higher growth compared to Bharti’s 24% increase in EBITDA,” Motilal Oswal<\/a> said.
This hike, catering to ~70% of its revenue pool, can potentially offer an incremental EBITDA of Rs38 billion, i.e. a 68% jump as compared to 13% for Bharti Airtel, Motilal Oswal said in a note.
“While there is a limited risk of downtrading, given the way the price plans are designed, there is a risk of steep market share loss similar to the last price hike (Dec’19), which saw a mere 20% flow through of the estimated EBITDA upside at INR15 billion,” Motilal Oswal added.
The telco’s financial crisis has already been averted following the four-year moratorium on government payments of spectrum and AGR (adjusted gross revenues). It has an option to convert interest on government dues to equity by 12 January, 2022, while conversion of principal will be at the end of four-year moratorium period and at the discretion of the government.
The tariff hike caters to 70% of its revenue pool (excluding postpaid and the B2B business), thus offering incremental revenue\/EBITDA of INR55b\/INR38b (2QFY22 annualized), i.e. a 14%\/68% increase.