The much-anticipated tariff hikes have been delayed by the telecom sector owing to multiple reasons. According to the analysts, the possibility of a higher subscriber churn rate, indirect inflation, and the amount of money spent on the 4G spectrum auctions are key reasons for the industry to not go for the tariff hikes right away.
Tariff hikes will directly impact the market share growth of the telcos. While Jio and Airtel are wary of that, Vodafone Idea (Vi) is tough because of its financials.
Vi recently increased the tariffs of its two entry-level postpaid plans earlier priced at Rs 598 and Rs 749 to Rs 649 and Rs 799. Even though it isn’t a major move by the telco, it is a sign that Vi will go for tariff hikes much earlier than Jio and Airtel because it desperately needs to improve its average revenue per user (ARPU).
Vi’s Declining Subscriber Base and Financial is the Reason for Early Tariff Hikes
With an increase in the tariffs, Vi will be able to increase its ARPU and, in turn, overall revenues. However, the increased prices will directly impact the market share of the telco.
Vi’s subscriber base has been declining for consecutive months now. With the prices moved to an even expensive zone, most of the Vi users who are on the edge of porting out will surely make their move to either Jio or Airtel.
But there is nothing Vi can do about it at the moment. The telco severely needs higher revenues to stay afloat and compete with the other two private operators.
When the Telecom Regulatory Authority of India (Trai) report came in for January 2021, the industry took a sigh of relief, looking at Vi’s positive gross subscribers' addition. However, later, the telco reported to the regulator that it had made an ‘inadvertent error’ in analysing and sharing the numbers.
According to the report, Airtel held 29.6% of the market share, with 336 million total active subscribers, while Jio had the highest market share of 35.5%, with 410.73 million active subscribers.
Even though the tariff hikes are delayed by the industry, the analysts are positive about its overall growth in the medium-term. APRU remains a key trigger for Vi to increase its growth rate, so the investors of the company need to stay put.
At the same time, according to the analysts, Airtel remains a good company to put money in because of its recent corrections.