2 min read.Updated: 16 Nov 2020, 10:50 PM ISTIshita Guha
Addition of 4G users has improved telco’s metrics, but debt situation remains grim
Vodafone Idea Ltd added 4.6 million mobile broadband subscribers in August, the highest among all telcos, as it continues to convert a large number of its 2G customers to higher-paying 4G users.
According to Telecom Regulatory Authority of India (Trai) data, rival Bharti Airtel Ltd added 3.2 million mobile broadband users, while Mukesh Ambani’s Reliance Jio Infocomm Ltd signed up 1.9 million during the month.
Vodafone India’s addition of 4G customers, despite the fall in its overall subscriber numbers, helps improve its financial metrics, but analysts said the company still needs cash to tide over its current debt situation.
Many 4G subscribers who did not recharge during the lockdown needed data for consumption as the economy reopened, said analysts. “Conversion of 2G subscribers to 4G seem to have picked up. MBB (mobile broadband) market share was up 42 bps (basis points) m-o-m (month-on-month) at 17.2%," said Axis Capital in a report.
“When focus is on converting your 2G customers to 4G, data consumption will automatically rise with faster internet, hence the need to recharge more… Work-from-home is also creating demand for new MBB connections," said a telecom analyst, requesting anonymity.
However, the addition of mobile broadband users may not be enough to solve Vodafone Idea’s massive liquidity requirements.
“It is too early to read a trend in Vodafone Idea’s additions of mobile broadband subscribers in August. Focus on higher Arpu customers can help Vodafone gradually improve its revenues," telecom consultant Mahesh Uppal said.
Uppal added that Vodafone Idea needs financial support — either from the government or its investors — to sustain in the medium term, and this would be a major challenge. The company has already announced plans to raise ₹25,000 crore through debt and equity.
Analysts believe the fundraising will help the telco continue business for a maximum of two years, but it is not a solution for the long term.
To be sure, Vodafone Idea lost mobile customers for the tenth straight month in August, but analysts say that retaining and adding high-paying 4G users will eventually help improve its average revenue per user (Arpu) and reduce cost of maintaining the 2G network.
Vodafone Idea’s Arpu rose to ₹119 in July-September, up from ₹114 a quarter ago.
Mobile broadband is provided over cellular network and uses portable modem (dongle), USB wireless modem (WiFi dongle), tablet or any other mobile device to give internet connection.
Bharti Airtel had a mobile broadband market share of 22.5% in August, up 12 basis points from the previous month, while Reliance Jio recorded a decline of 61 bps to 57.9%, due to higher additions on Airtel and Vi’s network, even as it remains the leader with 402.67 million subscribers.