Vodafone Idea (Vi) has been in the conversation since the time 5G spectrum auctions started. But the sad part is that most of the conversation isn't on the positive side. Just a couple of days back, Vi also announced its quarterly performance results. If you are an investor in Vodafone Idea or are thinking of getting some stocks of the telco in your portfolio, there are some things that you must put focus on. I won't just be focusing on the shorter vision of the stock but also on the long-term vision.
Vodafone Idea ARPU
This is a figure that you must put a strong focus on. The average revenue per user (ARPU) is a figure that determines the average money that the telco is earning from each of its consumers. Thus, the higher this figure is, the better it will be for the overall revenues. For Q1 FY23, Vi reported its ARPU to be 128. In the previous quarter, this figure was Rs 124. While the ARPU has risen, it is far from where the telco's medium-term goals are. Vi aspires to reach Rs 250 ARPU figure in the medium-term.
I don't think that's going to happen without more 4G subscribers and multiple tariff hikes. Airtel and Jio's ARPU figures are way higher, almost near to Rs 200 level now. On the note of tariff hikes, let's address what Vi's current CEO, Ravinder Takkar said.
Vodafone Idea to go for Tariff Hike Soon
In the recent investors' call, Takkar said that tariff hikes would come before the end of this year. We can likely expect Vi to go for tariff hikes after the festive season is almost over. In 2021, all the telcos implemented tariff hikes by the end of November, while Jio implemented it on December 1. So tariff hike will definitely be a push to the telco's ARPU. It might come close to crossing the Rs 150 mark once the tariff hike is implemented. So this is a slightly long-term vision.
Other Key Metrics
The 4G subscribers of the telco are growing, but not at a fast enough pace. There are still a lot of low paying 2G customers, and that's not serving Vi any good. The telco's ARPU will spike up if it can get users to upgrade to 4G. The average data consumption and voice calling consumption are up, but if it's not converting into profits, not going to make any difference.
The telco's 5G plans are unclear for now. It has purchased spectrum in 17 priority circles for 5G, but how it will execute it and when it launches 5G is something that remains to be seen. On Friday, Vi's stock closed at the same price as on Thursday. There's government equity also in the company.
