Vodafone Idea (Vi), the third largest telecom operator in India, is in desperate need of tariff hikes. While the telco is currently in the process of raising funds through a follow-up offer to the public, its finances are in jeopardy. Its current level of revenues is not enough to handle the payments that the government will start demanding once the moratorium period ends in FY26.
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Vi will utilise the funds raised right now to invest in 4G networks. The telco's current level of capex has been far too low compared to Jio and Airtel resulting in a subscriber churn at an alarming rate. The telco's active user base is around 195 million. It needs tariffs to go up sharply to keep cash flow steady.
The previous tariff hike came in late 2021 when tariffs were increased by about 20%. This time too, around 20% - 25% hikes are expected. Telcos will be able to increase their average revenue per user (APRU) with the help of increased tariffs.
Vi has vendor dues as well as moratorium payments. The telco will need to bump its revenues to be able to handle everything. Apart from equity funding, Vi is also looking to raise money through debt. The telco was reportedly in talks with financial institutions to raise money.
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Vodafone Idea is trying to regain its lost revenue market share. The telco is not looking to roll out 5G in a hurry due to the fact that its monetisation is hard at the moment. Jio and Airtel benefitted the most from the previous tariff hikes. Airtel saw its ARPU climbing beyond Rs 200 while Jio's ARPU is around Rs 181.7.
Telcos are expected to raise the tariffs once the general elections are over.
