Vodafone Idea (Vi), India’s third-largest telecom operator, is going to be hurt because of the delayed tariff hikes by Reliance Jio and Bharti Airtel. Vi has been waiting to increase tariffs for so long now, but the operator can’t do it till the time Airtel and Jio push for tariff hikes as well. It is highly unlikely that either Jio or Airtel will be looking to increase tariffs. Both the companies are doing reasonably well and are competing head-to-head when it comes to the active subscriber base. Thus, they wouldn’t want to hurt their position in the market by increasing tariffs all of a sudden.
Why Is Vodafone Idea Waiting For Airtel and Jio to Increase Tariffs?
Vi needs to wait for the other two private operators before it increases tariffs. This is because if Vi increases tariffs and none of the other operators follows, a lot of users will be looking at Jio or Airtel for cheap tariff plans, and Vi would further lose subscribers to Airtel and Jio.
It is worth noting that Vi has lost a ton of its subscribers to Airtel already because the latter provides prepaid plans at a slightly lower tariff and offers better coverage. Vi can’t afford to lose more subscribers in a jiffy since the telco hasn’t added a net positive number of subscribers for consecutive quarters now.
Why Aren’t Jio and Airtel Helping Vi By Increasing Tariffs?
Neither of the telcos will increase tariffs at a point when the competition is for gaining a larger market share. Since Airtel has been adding more subscribers than Jio for consecutive months, the telco wouldn’t jeopardise the growth rate by increasing tariffs.
At the same time, Jio won’t increase tariffs because it wouldn’t want more subscribers to go Airtel’s way anymore. Further, according to a report from Crisil, a local rating agency, both Jio and Airtel have a very similar active subscriber base. Jio’s active subscriber base stands at 33.7%, whereas Airtel’s active subscriber base stands at 33.6%.
So really, none of the companies would be ready to risk their growth rate by pushing for tariff hikes. This leaves Vodafone Idea in a very tricky position. Now the telco needs to decide whether it will keep offering the plans with the same tariffs or will it increase it regardless of what other telcos are doing.
Vi needs a higher average revenue per user (ARPU) to meet its operational costs, let alone book profits. The telco has been under a lot of financial stress lately, which has been aggravated by the Supreme Court’s decision on the Adjusted Gross Revenue (AGR) dues case. Further, the telco has been unable to find an institutional investor resulting in added financial woes. Vi will likely go for tariff hikes much sooner than Jio and Airtel and is also expected to lose more subscribers.
It is worth noting that Vi’s network was rated the fastest in India for three consecutive quarters by Ookla. The telco can leverage its network and ramp up its offerings to increase revenues before it goes for an inevitable tariff hike. The clearance on the AGR dues matter will also help the telco plan for its future more accurately.