In the first week of May, we saw Bharti Airtel do away with postpaid plans which were priced below Rs 499. Not only that, but the telecom operator also removed some of the other postpaid plans from its portfolio as well which included plans like Rs 649, Rs 1,199 and more. Now in a similar move, the telecom market leader, Vodafone Idea could also discard similar low-value postpaid plans to boost average revenue per use (ARPU), reported ET Telecom. This would obviously come at the cost of subscribers who are likely to resort to rival telcos. Balesh Sharma, Vodafone Idea CEO has spoken of this move to analysts in an earnings call on Tuesday.
Vodafone Idea Reduces Expenses and Helped by Tax Returns
Bharti Airtel has removed the Rs 299 and Rs 399 postpaid plans from its portfolio, which were some of the most liked plans. It is worth noting that the telco has a total of 5-7% postpaid subscribers in its total subscriber base of 284 million, but this small portion of subscribers contributes approximately 20-25% of revenue to the entire share of Bharti Airtel's revenue. Talking about this prospective move, Balesh Sharma said, "We too have a Rs 299 plan and may decide to move in and start with a few markets first."
Vodafone Idea also revealed that helped by a tax refund and reduced expenses, its losses had come down to Rs 4,878.3 crore in the fourth quarter and the revenue growth remained flat and 53.2 million users switched to rival operators.
Vodafone Plc also reported an annual loss of Rs 7.6 billion on Tuesday with Rs 3.6 billion spent on Vodafone India's merger with Idea Cellular along with other impairments. Analysts also highlighted that Vodafone Idea’s service revenue rose 0.1 % on-quarter to Rs 11,775 crore in January-March but still it was lagging in comparison to the other rival telcos, Reliance Jio and Bharti Airtel. According to Credit Suisse, the sequential 4.3% and 7% growth in the telecom revenue was upped by Airtel and Reliance Jio, while the telecom market leader continued to lose market share.
VIL to Focus on 10 Million Subscriber Addition Per Quarter
Vodafone Idea Limited also said that it would rapidly need to focus on 4G LTE expansion and target 10 million subscriber addition every quarter. Also, as per Goldman Sachs, Vodafone Idea might find it tough to close the gap with rival telcos as its net debt-to-Ebitda or ‘leverage ratio’ is estimated to remain at uncomfortable levels of over 7x till FY21, even after raising Rs 25,000 crore in a rights issue.
“We see risks to market share on Voda Idea’s high-end customer base due to its lagging network quality as its capex levels are 60-80% below peers, and also amid Jio’s continued focus on customer acquisitions,” said the US brokerage.
On a positive note, however, brokerage firms Jefferies and CLSA said the 38% sequential jump in VIL’s Ebitda to Rs 1,550 crore in the March quarter exceeded estimates and was driven by higher-than-expected merger synergies.
Sharma also highlighted that interconnect usage charges paid by the telco in the quarter were lower at Rs 400 crore compared with Rs 460 crore in the previous quarter.