Vodafone Idea in a Tricky Situation: Opinion

Vodafone Idea's dilemma around tariff hike keeps on changing. Earlier, it was whether to go for it or not in fear of Airtel and Jio not following up, which would result in market share loss. But now, it is about justifying it. There's no concern about Vi not being able to go for tariff hikes. Airtel has made its stance clear on the same, and Vi doesn't have to worry about others not following up. 

Highlights

  • Vodafone Idea (Vi) has been through a lot and is still going through a difficult phase in its business journey.
  • Vodafone Idea's 5G game is going to be relatively weaker than its competitors.
  • Vi doesn't have the amount of 5G spectrum that Airtel or Jio do.

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Vodafone Idea

Vodafone Idea (Vi) has been through a lot and is still going through a difficult phase in its business journey. The telco has been working its way through several things. But the biggest problem right now for Vi is to get the confidence of outside investors. From the side of the promoters, the telco has received enough help already. Now it needs an external investor or a group to come in and pour in some money. There's no doubt that the kind of infrastructure Vodafone Idea has already built across India is phenomenal, and as a company, Vi has been very aggressive in getting the attention of its customers. Even when it comes to marketing, Vi has an excellent bunch of people fueling exciting campaigns to drive growth. But the only place where Vi gets beaten by its competitors is PAN-India 4G coverage and availability quality.

Since the telco is almost always in a cash liquidity crisis, it looks after select priority telecom circles in India where it thinks it can earn maximum revenues. But, here's the thing. If, as a customer, you have got two options where one player is offering great coverage and availability of 4G network services for either the same or lower price or the second where you have to pay equal or more money to get 4G network services that will work best in a few circles only, what will you do? You will, of course, go with the first option.

Vodafone Idea is not actually bad! But it is comparatively not as good as Jio and Airtel when it comes to offering 4G network services. I am not just talking about speeds; it involves a lot of factors to determine whether a network service is good or bad. Vi has been behind Airtel and Jio in several areas (referring to the latest Opensignal report for India).

Tariff Hike Dilemma for Vodafone Idea

Vodafone Idea's dilemma around tariff hike keeps on changing. Earlier, it was whether to go for it or not in fear of Airtel and Jio not following up, which would result in a market share loss. But now, it is about justifying it. There's no concern about Vi not being able to go for tariff hikes. Airtel has made its stance clear on the same, and thus, Vi doesn't have to worry about others not following up.

But right now, the bigger challenge for Vodafone Idea would be to justify the tariff hikes to the customers. Investors of the telco wouldn't be as worried, but the customers will look for an upgrade in the service quality if they have to pay more. In the Indian market, one thing that every mobile customer goes through is network congestion. It is the same for Vi customers on multiple occasions.

The management's stance on this is that the average revenue per user (ARPU) figure should be higher than where it is right now. Because it will boost revenues. The higher revenues the telco will make, the more it can sustain and put back into the business for expansion. There's no doubt that another tariff hike from Vi is coming, but it would be just better if the telco could justify it to the customers and explain why it is also necessary.

Relatively Weaker 5G Game

5G

Vodafone Idea's 5G game is going to be relatively weaker than its competitors. The telco has purchased 5G airwaves in both the mid-band and the mmWave band. But the spectrum purchased by Vi is for priority circles only. For the Category C circles, Vi has avoided purchasing any 5G spectrum except for the Bihar circle, where the telco got airwaves in the mid-band for 5G.

Now there are multiple things to consider here before we judge Vi. First, most telcos might not launch 5G networks in the Category-C circles, but they have taken the spectrum to roll it out at a future date. Since Vi didn't have money, it didn't purchase airwaves in the Category-C circles because it wouldn't have made any sense. But then there's also a possibility that the competitors do launch 5G services in Category C circles. Then Vi will have no other option but to sit and watch the competitors eat away the entire 5G market share.

In addition to all this, Vi doesn't have the amount of 5G spectrum that Airtel or Jio do. This will affect the company in the initial phase and the medium-term when offering 5G services.

There are plenty of other issues that the company needs to address, such as debt, a falling customer base, weaker capex spending, and more. All of this wouldn't have been that big a problem had the telco raised capital from external investors/institutions.

Vodafone Idea will be giving its majority stake to the government in the foreseeable future. This is also something that the external investors would be worried about. It will be interesting to see what the telco's next move is going to be.

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Tanay is someone with whom you can chill and talk about technology and life. A fitness enthusiast and cricketer, he loves to read and write.

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