Home / Industry / Telecom /  ‘VI won’t hesitate to lead next round of tariff hikes’

NEW DELHI : Vodafone Idea Ltd won’t hesitate to lead the next round of tariff hikes, chief executive officer and managing director Ravinder Takkar said, as India’s third-largest telco aims to achieve average revenue per user (Arpu) levels of 350-400 over the next three to five years.

Taking into account inflation since 2016, current Arpu levels are far lower than what they should be, Takkar said in an interview. According to him, while telecom services have become critical, the share of customer wallet had only shrunk, making the case for higher tariffs.

“In 2016, industry Arpu was 200-205, which in today’s money terms would be about 350-400. But today, telecom as a share of the wallet spend of any consumer has shrunk to about 150, which in today’s money, is 50-60% lower than what it would have been in 2016. While telecom services were important then, they are critical now, so there’s no reason why five years from now, we can’t be where we were in 2016," Takkar said.

He added that the short-term goal for the carrier will be to improve Arpu to 200, and progress to 250 and then to 300, in stages, which will provide a reasonable return on capital employed, a key metric that investors look at while making investments.

“I’m always willing to lead it (tariff increase). I have led it before and if I think it’s the right thing for the business, I would certainly be happy to lead another price increase," Takkar said.

While Vodafone Idea’s Arpu has risen to 124 as of March 2022, it still lags Bharti Airtel which has the highest Arpu of 178 and market leader Reliance Jio which has Arpu of 168.

The top executive said that the company’s plans to raise additional funds of about 20,000 crore, equally split between debt and equity, from external investors were close to fruition, and their completion could lead to the promoters putting in more equity.

“They’ve put in 4,500 crore, which I think has been very helpful. It sets the ball rolling for other investors to come in, it sets the ball rolling for potentially even more promoter equity to come in," Takkar said. Aditya Birla Group and Vodafone Group PLC invested 4,500 crore into Vodafone Idea in FY22, leading to an increase in promoter holding in the Indian entity.

The promoter equity is part of the 25,000 crore capital infusion plan laid out by the carrier in September 2020.

“We are closer than ever than we would be to fundraising and I can tell you, there’s no hold-up; it’s a process. We are progressing," Takkar said. Asked whether the talks involved raising funds from Amazon or Amazon Web Services, he declined to comment.

The carrier, sitting on the industry’s largest pile of debt of 1.98 trillion, has been trying to secure funding for nearly two years, with little success.

Takkar said that while 90% of the debt was owed to the government, existing lenders were more comfortable with their exposures to Vodafone Idea after the government’s relief package. He added that banks were willing to lend more, which will drive its capex plans and improve network coverage of 4G sites.

After the government’s olive branch to the industry, Vodafone Idea took the option to pay its adjusted gross revenue dues—the highest among the three telcos—after a moratorium of four years, in instalments, and also opted for converting the interest on these dues during the moratorium into equity to be owned by the government.

Takkar said that government shareholding in the carrier should be completed soon with the latest clearance coming from the Securities Exchange Board of India (Sebi) exempting the government from an open offer after taking majority shareholding in the Aditya Birla Group-promoted company.

He noted that the dramatic shift in the government’s view of the industry, as an essential service provider instead of a cash cow, has helped the industry immensely.


Gulveen Aulakh

Gulveen Aulakh is Senior Assistant Editor at Mint, serving dual roles covering the disinvestment landscape out of New Delhi, and the telecom & IT sectors as part of the corporate bureau. She had been tracking several government ministries for the last ten years in her previous stint at The Economic Times. An IIM Calcutta alumnus, Gulveen is fluent in French, a keen learner of new languages and avid foodie.
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