The news about the acute pressure on the telecom industry is making waves on the internet. The worst-hit company among all has been Vodafone Idea. There has also been pressure from the UK based Vodafone Plc about the financial situation of the company and the Indian telecom industry. In the wake of all these new developments, Vodafone Idea has announced that it will be raising its tariffs starting December 1. This is a major announcement from the telecom operator, which means that the subscribers of Vodafone Idea will have to pay more than what they are paying right now. Not only this but in an industry which is immersed in some massive competition, this is likely to affect Vodafone Idea in other ways as well. It is worth noting that after the introduction of the minimum recharge plans to correct the ARPU and to push it upwards, Vodafone Idea has been continuously losing subscribers.
VIL Announces Raise in Tariffs In Two Weeks
Vodafone Idea, in its latest press release, has noted, “Building on its largest spectrum footprint and by accelerating its network integration, VIL is speedily expanding both its coverage and capacity and is well on track to offer 4G services to 1 billion Indian citizens by March 2020. Mobile data charges in India are by far the cheapest in the world, even as the demand for mobile data services continue to grow rapidly. The acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high-level Committee of Secretaries (CoS) headed by the Cabinet Secretary is looking into providing appropriate relief. To ensure that its customers continue to enjoy world-class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective 1 December 2019.”
Tariff Raise to Increase ARPU and Help In Paying Off Dues
Now, this is a significant announcement from the former leading telecom operator of the country, and it has many implications. The first of them being that Vodafone Idea is making this move to help its motive financially, which means that the raising of tariff would bring in more revenue for the company, and it would also push the ARPU upwards, which has been one of the major focuses of Vodafone Idea. But, there is also another side to the story as well, which is the response from the subscribers. Given that a lot of subscribers have been porting out of Vodafone Idea, and the same followed for Reliance Jio after it introduced the IUC charge on its outgoing calls, the subscribers now have one more reason to quit on Vodafone Idea, which is likely to result in Vodafone Idea losing more subscribers.
SUC and License Fees Become Trouble for VIL
On the other hand, the telecom operator is also under some massive dues, the latest of them being brought upon by the Department of Telecommunication (DoT) in the name of license fees and Spectrum Usage Charges (SUC). This new burden comes after the Supreme Court of India ruled on the definition of AGR, thus bringing along total dues more than Rs 80,000 crore collectively on Bharti Airtel and Vodafone Idea out of which VIL has more to pay. Although the telcos have requested some form of relief from the government, they will still have to empty their balance sheets to procure enough to pay off the dues. The rise in tariff from VIL is also likely to help this move and will keep the telco from making a big void in its finances. Given that the telco has to pay off its dues by July next year, the tariff hike by VIL has been timed rightly.