Vodafone Idea (Vi) reported its ARPU (average revenue per user) gain to be 7.8% QoQ for Q4 FY22. The figure went from Rs 115 in Q3 FY22 to Rs 124 in Q4 FY22. While this is a positive development for the telco, one of the key metrics, which is the subscriber churn rate, is still not where it should be.
The telco said that its subscriber churn rate stood at 3.4% for the quarter. Compared to the previous quarter, it is exactly the same. It hasn’t improved nor worsened, which is not a good thing in any way. A churn rate of 3.4% is higher than what Vi can afford in the medium run.
The telco’s ARPU gains will be offset if there are fewer active subscribers compared to Airtel and Jio. This is because the investments that Vi will have to make will be equal to what Jio and Airtel are making. But, if the telco doesn’t boast a substantial gain in VLR or active subscribers, its ARPU gains won’t affect the revenues in any significant manner.
It is worth noting that Vi has been adding 4G subscribers for consecutive quarters. The current number of 4G subscribers of Vi stands at 118 million. This isn’t a great number, to be honest, as Airtel and Jio have more than twice the number of 4G subscribers.
So ARPU gains for Vi would still mean not sufficient revenues to be profitable. What would be really funny here is if Vi again goes for a tariff hike. The truth is, Vi isn’t in a position to do that. The telco doesn’t have at par networks compared to its competitors. Thus, in a situation like this, if Vi decides to raise tariffs further at the end of 2022 and offer its services at the most premium costs, the telco’s subscribers just won’t stay.
What Will Vi Have to Do Here?
The telco needs to excel in multiple areas consistently to gain new subscribers. First of all, there is a dire need for improving performance in metrics such as coverage and 4G availability. Second, the telco needs to delay the tariff hike to at least 2023, if not more.
The ARPU figures will improve if more customers from Jio and Airtel port out to Vi for its premium plans (this will only happen if the telco improves network performance). Right now, Vi should try to aggressively add as many 4G users as possible and let the focus on ARPU slide a little.
The telco has been announcing new partnerships and launching new features/products such as a job portal, Vi Games inside the Vi mobile app and more. But the thing is, the primary concern of a mobile user is to get good network coverage. The other incentives are added on top of that.
At present, it looks like Vi is trying to give as many incentives as possible to users for joining its network without actually improving the network performance. Of course, when we are talking about improving network experience, it will not happen in a day or a month either. It will take some time, and the good thing for Vi is that the government interest now also lies in the survival of the company.
So, the telco does have time. It won’t be worried about going out of the market any time soon. But for things to go right and Vodafone Idea to self-sustain, along with the ARPU, there should be a substantial gain in revenues, 4G users, and network performance.
