Vodafone Idea (Vi) is looking to reach an average revenue per user (ARPU) figure of Rs 250 in the medium to long-term, said Ravinder Takkar, CEO, Vi. The company’s management has a target ARPU of Rs 200 in the short term while Rs 250 is for the long term.
During Q4 FY22, Vi reported its ARPU to be Rs 124, up by 7.8% QoQ with the support of tariff hikes implemented in December 2021. Now, to reach that ARPU goal of Rs 200 in the short-term and Rs 250 in the long term, the telco needs a few more rounds of prepaid tariff hikes.
But it’s not exactly going to be a walk in the park for the telco.
Vi’s Annual Payments Likely to Increase Up to Rs 40,000 Crore Once Moratorium Period Ends
According to an ET Telecom report, Citi Research said that Vi has a total spectrum/AGR liability of Rs 1.8 lakh crore, which implies annual payments of Rs 40,000 crore after the moratorium period ends. To meet this humongous liability, Vi would require a steady cash flow from the business.
Thus, the number of 4G subscribers the telco adds over the next few quarters will be very important for the investors. As of now, Vi has the lowest number of 4G users on its network amongst the operators which offer PAN-India 4G service.
Thus, the telco will be looking to earn more and more out of its premium customers. To even reach Rs 200 levels of ARPU, Vi would require multiple tariff hikes. To reach the Rs 250 level, the telco would require a majority of its subscribers to opt for the most premium plans. That is why growth in the 4G subscriber base is of utmost importance for Vi.
The telco currently has 118 million 4G users, which is very less compared to what Airtel and Jio boast in their books. Vi’s management is also counting on the conversion of legacy network users to 4G services which will also aid in improving ARPU.