Vodafone Idea, the third largest telecom operator in India, needs to hike the tariffs further for a better ARPU (average revenue per user). The telco cannot generate healthy returns unless it earns more out of each of its customer. While the telco can definitely improve ARPU without hiking tariffs, it won't happen fast enough for the company to be able to compete with Airtel and Jio. But tariffs isn't the underlying issue for the company. It's the telco’s ability to add 4G users. Post the tariff hike in July 2024, not only did Vi lose mobile users, but its 4G user addition rate also decelrated.
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As per data shared by Vi, the telco only added 400,000 or 4 lakh 4G users in an entire year. From Q3 FY24 to Q3 FY25, Vi's 4G user base grew from 125.6 million to 126 million. This is very poor performance from the telco in the 4G user department. Vi is trying to resolve this issue by expanding coverage for 4G throughout India. The company has scaled its capex significantly after raising significant funds from equity in calendar year 2024.
The coming quarters will tell the story about whether the improved 4G networks were able to help Vi in adding new mobile customers, especially the 4G/5G ones. The telco has also announced that it will deploy 5G and activate commercial 5G services in Mumbai in March 2025. More cities will added to this In April 2025.
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With more 4G users, Vi will be able to improve it's ARPU without tariff hike. However, this will not be enough, as mentioned above. The telco will need another round of tariff hikes to reach around Rs 200-210 figure fast. In Q3 FY25, Vi's ARPU was Rs 173 from mobile business. In comparison, Jio's ARPU was Rs 203.3 while Airtel’s ARPU was Rs 245.
If Vi is able to add new customers and improve ARPU, it will go a long way for the telco to be able to raise more funds via debt and equity in the future.
