Ravinder Takkar, MD & CEO of Vodafone Idea said that tariff hikes are integral to improve the health of the sector. At present, the Tariffs that are charged by Bharti Airtel and Vodafone Idea are around 15-20% more than that of Reliance Jio. This has prompted Bharti to stay put till Jio also raises them due to competition. However, Ravinder Takkar has clearly stated that his company wouldn’t wait for others to raise their tariffs and would hike them whenever the time is felt right. He has confirmed the telecoms engagement with investors to raise funds to Rs 25,000 crore.
Analysts suggest that owing to its poor position compared to that of its competitors in terms of the adjusted gross revenue it owes to the government, revenue growth, subscription addition, and average revenue per user, it would need to sharply raise its tariffs. Vodafone Q3FY21 revenues were only up 1% compared to 7 % and 6 % of Bharti and Reliance Jio respectively. Vodafone Idea’s net subscriber loss did manage to narrow from 8 million to 2 million but was irrelevant compare to net addition by Bharti and Jio of 14 million and 5 million respectively.
Goldman Sachs analysts believe Vi would have enough liquidity till Dec 2021 but would capital shortfall for the remainder of the FY till April 2022 due to the Rs 21,500 crore worth dues payable, in case there is no tariff hike. They also observed that a one-time capital raise wouldn’t be enough due to the recurring nature of the dues. They would require to double their EBITDA up to 4 times compared to that in December to be FCF neutral. To reach an ARPI increase by 1.9 times they would have to start hiking tariffs very shortly which would also boost operational cashflow according to another analyst at ICICI securities. The board of Vodafone Idea had approved a fundraising plan of Rs 25,000 crore in September 2020.
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