Vodafone Idea to hike tariff by 20-25% from Nov 25, follows Airtel

Vodafone Idea is increasing prepaid tariffs by 20-25 per cent and top-up plan tariffs by 19-21 per cent.

Vodafone Idea (Vi) has increased its prepaid tariff by 20-25 per cent, joining rival Bharti Airtel which increased its rates on Monday. Vi’s new rates will come into effect from November 25.

The tariff hike, which comes two months after the telecommunications (telecom) reforms, is a step towards improving financial stability of the sector. In the case of Vi, this could also help to boost investor sentiment and raise funds. The company hopes to complete fund-raising by the end of this financial year.

“The new tariff plans will start the process of average revenue per user (ARPU) improvement and will help address the financial stress faced by the industry,” said Vi in a press release.

It added that these tariff plans will allow the company to continue improving India’s fastest mobile network.

“Vi remains committed to play its role in accelerating the realisation of Digital India vision of the government,” the company said in a press release.

Vi has the lowest ARPU among telecom companies. In the second quarter, it reported an ARPU of Rs 109 — a sequential increase of 5.3 per cent.

Both Airtel and Vi have said that APRUs need to increase to Rs 200 in the near term and Rs 300 in the long term.

While both Airtel and Vi had hiked rates in entry-level prepaid plans and certain postpaid and family packs a few months ago, the latest hikes by Vi will impact rates across all slabs (existing Rs 79-2,399). While the rate in the entry-level slab has been increased by 25 per cent, in all other slabs, the increase is 20 per cent. Rates for data top-ups, too, have been increased.

Prepaid customers account for 90-95 per cent of the customer base for Airtel and Vi.

According to India Ratings & Research (Ind-Ra), the price-hike move is possibly aimed at shifting non-data customers to data service, which can lead to higher ARPUs for the industry.

“Furthermore, lower proportion of voice-only customers can help telecom companies in re-farming some of the 2G/3G spectrum to 4G, can reduce operating expenses, as well as reduce the requirement for further spectrum,” said Ind-Ra.  

Vi, which has been losing customers to its rivals, is looking to raise funds for capacity expansion, improve network, and clear debt. While it has received a breather in terms of a moratorium on spectrum and adjusted gross revenue-related dues, it has upcoming debt payments of around Rs 6,000 crore over the next few months.

A top executive with a Mumbai-based bank said although the tariff revision by Vi is beneficial and will improve its financial health, it is not adequate. “An additional correction in tariff is required for any significant improvement. The tariffs in India are among the lowest and certainly not sustainable,” he said.

Vi executives have held several rounds of discussions with lenders who are considering a comprehensive package, said another senior bank executive. “While bank loans and fresh capital will enhance the liquidity profile, these are supports and not the primary source. The company has to look at augmenting its income,” he added.