Vodafone Idea’s chief executive officer indicated that increasing inflation will not be a barrier to hiking prices in the short or long term because consumer spending on telecom services is a small percentage of the customer’s wallet, indicating that additional tariff rises are likely in the coming quarters. In the future, the third-largest carrier is considering a use-more, pay-more approach for tariff rises, which will have less impact on low-end customers.
“From an inflation standpoint, telecom continues to be a very small piece of consumer spend,” Ravinder Takkar said.
“Thus, this does not become an impediment (to tariff increases) and does not provide an opportunity for prices to become too high in terms of affordability in the next one or two hikes.”
Even in the face of rising inflation in other categories of products and services, Vodafone Idea’s senior executive claimed that the sector needs higher rates and that rises may not hurt customers as much because telecom services made up such a small percentage of consumer spending.
The third-largest carrier in terms of subscribers and market share is heading toward an uneven distribution of price and fees, with no guarantee of a certain proportion on price points. “Probably there will be less price increase as a percentage at the lower end and probably the price increase for higher usage, basically pulling the principle that if you use more, you pay more,” said Akshaya Moondra, chief financial officer.
In answer to a query, Takkar stated that the rate of tariff increases may go up, noting that there was an opportunity now after years of tariffs being among the lowest in the world.
“From my perspective, it can really happen faster and certainly be hastened,” he added. “I don’t see any hurdles to these tariff rises not happening, and I feel that we are headed on the correct path.”
Customers on 2G switching to unlimited 4G plans, digital partnerships, and further hikes in headline tariffs, which could go up to $200 in the short term and $250 in the long term, are expected to boost Vodafone Idea’s earnings before interest, tax, depreciation, and amortisation (EBITDA) and average revenue per user in the coming months.
The telco’s average revenue per subscriber, a crucial metric of profitability, increased significantly from 115 in the December quarter to 124 in the three months leading up to March. This contributed to the revenue of 10,239 crores, up 6.6 per cent year over year and higher than the prior quarter’s $9,717.3 crore. The firm also reported a 7.7% increase in average daily revenue, the biggest since the merger in 2018.
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