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Vodafone Idea CEO pushes for further tariff hikes for telecom services



Telecom operator in talks with investors for funds

Vodafone Idea CEO Ravinder Takkar said there was an urgent need for industry-wide tariff hikes to become sustainable.

“The rate of industry-wide tariff must increase. In the short-term, we are looking at ARPU (Average Revenue per User) of ₹200, this must increase to ₹250 in ARPU in the long term,” Takkar said at the post-earnings investor call on Wednesday.

The telco has already seen a 20 per cent increase in ARPU, since the tariff hikes starting in August 2021, as per Takkar.

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According to their latest financial results, Vodafone Idea has seen 7 .7 per cent q-o-q increase in ARPUs for the March quarter to ₹124 from ₹115. This was a result of the 20-25 per cent hike across pre-paid plans that the telco took in November. 

Analysts’ reaction to the corresponding increase in Vodafone Idea’s revenues has been mixed. On one hand, UBS called the revenue accretive trends to be “healthy” and slightly above their estimates. Other analysts compare Voda Idea’s 5.4 per cent q-o-q revenue increase to Jio’s 8 per cent increase for the same period, and thus find uptick in revenues to be lacking. 

Equity infusion

Ahead of the earnings call, analysts flagged that the telecom operator needed to raise funds in the near term. Takkar said the company is in active talks with investors and banks regarding infusing equity into the company.

He said the telecom reforms package and the return of ₹16,000 crore worth of bank guarantees by the Department of Telecommunication in April have bolstered investor interest. “We are actively engaging with lenders and investors for fundraising,” said Takkar in his closing statements. However, Takkar did not specify the exact timeline by which the company will be closing its fundraising discussions. He noted that fundraising in “imminent”. 

When asked about when the company would further increase its tariffs. Takkar said that further tariff hikes must be industry-led. He also noted that given the high demand and the low proportion of consumer wallets that telecom spending occupies, the industry can take 1-2 tranches of tariff hikes without affecting consumers adversely. 

Takkar told investors that most of the revenue accretive effects as a result of the number of hikes have gone through. Therefore, future revenue hikes at the back of the increase in tariffs will not occur. Takkar pins his hope on Vodafone Idea’s 2G base upgrading to 4G plans, digital services that VIL is providing on the app will also give chances for monetisation in the long term. 

Vodafone Idea CFO Akshaya Moondra said the company will have to pay back around ₹8,000 crore worth of debt in the next 12 months. Of this, Moondra said that 60 per cent (nearly ₹6,000 crore) will be paid through “internal cash generation”. The remaining amount will be refinanced through additional loans, that VIL can now take now that DoT has returned a significant amount of bank guarantees.

Published on May 11, 2022

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