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Vodafone Idea does not expect rising inflation to become a challenge in raising tariffs in the short or long term since consumer spend on telecom services was a tiny part of the consumer’s wallet, its chief executive officer Ravinder Takkar said, signaling certainty to more tariff hikes in the coming quarters. The third largest carrier is also looking at a use-more, pay-more model for tariff increases going forward which will have a lesser impact on the low-end users. 

“From an inflation perspective, from share of wallet perspective, telecom continues to be a very small piece of consumer spend, therefore this does not become an impediment (to tariff increases) and does not provide an opportunity that prices become too high in terms of affordability in the next one or two hikes," Ravinder Takkar said. 

Vodafone Idea’s top executive said that industry required higher tariffs, and that hikes may not pinch consumers that much since telecom services formed a very small part of consumer spend, even in the face of higher inflation being faced by consumers in other categories of products and services. 

The third largest carrier by customers and market share is moving towards an unequal distribution of price and fees where it may not be a given percentage on price points. “Probably it will be that there’s 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 chief financial officer Akshaya Moondra. 

The pace of tariff hikes can accelerate as well, Takkar said in response to a question, noting that there was an opportunity to do so now after years of tariffs being amongst the lowest in the world. 

“From my perspective it can actually happen faster and certainly can be accelerated, and I don’t see any impediments to from these tariff hikes from not happening, I see that it is absolutely the right direction that we are moving," he said. 

Vodafone Idea expects its earnings before interest, tax, depreciation and amortisation (EBITDA) and average revenue per user to grow in the coming months on the back of customers on 2G switching to unlimited 4G plans, digital partnerships and further hikes in headline tariffs, which can go up to 200 in the short term and 250 going forward. 

“Certainly, the industry needs more tariff hikes. We’ve always stated that tariff hikes are what the industry needs we would like to see ARPU to go up to 200 at least in the short term and then further increase to 250 in the longer term," Takkar said in an analyst call on the company’s fourth quarter results on Wednesday. 

Takkar added that there may be some SIM consolidation, or customers letting go of their second or third SIMs due to tariff hikes, but the churn that the carrier saw as a result of its first tariff hike in November 2021, was significantly smaller. 

Takkar added that the carrier will continue to ask for more reductions in 5G spectrum pricing which has been suggested by the telecom regulator, and is now being considered by the department of telecommunications. Trai suggested a near 40% cut in base prices for 5G airwaves as opposed to more than 90-95% reduction from the earlier suggested base price that the industry was seeking. 

On debt servicing, the Aditya Birla Group company is looking to tie-up bank finance facilities with the lenders after the return of bank guarantees of 16,000 crore from the department of telecommunications. 

Of the total 81.6 billion debt that needs to be serviced in the ongoing financial year, a large chunk will get repaid out of cash margins, and largely from the return of bank guarantees from the government, Moondra told analysts. This would reduce the debt further to 60 billion for FY23, which will be serviced through through internal generation, he added. 

On Tuesday, Vodafone Idea said that it had narrowed its losses to 6,563 crore in the March quarter from 7,230 crore in the previous quarter. It also grew its key operating metrics, including revenue and margins, on the back of a tariff hike in November 2021. 

The telco saw a significant rise in average revenue per user, a key measure of profitability, which rose from 115 in the December quarter to 124 in the three months to March. This helped the company to post revenue of 10,239 crore, up 6.6% year-on-year, and higher than the 9,717.3 crore in the previous quarter. The company said average daily revenue also saw sequential growth of 7.7%, the highest since the merger in 2018.


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