Vodafone Idea (Vi), the third-largest Indian telco, came out with the financial and performance results for Q3 FY23 a couple of days back. The telco's overall subscriber base went down, but its 4G subscriber base grew. However, the growth of 4G subscribers' QoQ is too slow. From 120.6 million in Q2 FY23, the 4G subscriber base of Vi reached 121.6 million in Q3 FY23. In the same quarter the previous year, the 4G subscriber base of Vi stood at 117 million. This means in a year, its 4G subscriber base grew only by 4.6 million. This is a very slow growth to make an impactful difference in the company's financial performance.
The ARPU (average revenue per user) in Q3 FY22 of Vi was Rs 115. It jumped by Rs 20 to Rs 135 in Q3 FY23. Even the ARPU growth is very low compared to what Reliance Jio and Bharti Airtel saw in a year. It is worth noting that in Q3 FY22, all the private telcos implemented tariff hikes. Thus the effect of the tariff hike on the ARPU of Vi has not been that great to the extent that Jio and Airtel saw.
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Despite offering some of the best offers with prepaid plans, Vi has not been able to attract 4G users its way at a significant scale. That is also affecting the telco's potential to grow its ARPU. 4G users are the ones that would be using more data and paying more to the telco. Vi has a large subscriber base that still uses 2G and 3G.
Vi needs more 4G subscribers under its belt to improve ARPU and overall revenues. It is worth noting that it would be the 4G subscribers only that would also be interested in consuming the 5G services of the telco once it rolls it out. Thus the revenue upside with the 4G users is significant once 5G starts rolling out.
Vodafone Idea Fund Raising Plans
Vi is expected to raise funds in the near future. The telco's biggest hurdle of converting interest dues into equity is finally over. Vi also issued OCDs (optionally convertible debentures) to the American Tower Company (ATC) on Monday. The telco might get funds from the promoters in the near future as well. There were reports that the promoters are expected to invest an additional Rs 5000 crore into the company. Apart from that, the Aditya Birla Group is also looking for investors that would pump capital into Vi.
The funds would not only help Vi in clearing upcoming payments but also accelerate network expansion and modernisation. It should potentially help the telco in adding new subscribers in the future.