Home / Markets / Mark To Market /  Vodafone Idea raises tariff, but that hardly solves the problem
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Vodafone Idea has raised tariffs by 20%, effective 25 November, in-line with investors' expectations. The basic plan which costs 79 and has a validity of 28 days, will cost 99 beginning Thursday. 'The new plans will start the process of ARPU improvement and help address the financial stress faced by the industry,' the company said in its press release.

The decision followed competitor Bharti Airtel Ltd on Monday announcing a 20-25% hike in tariffs, effective 26 November. Analysts say, Vodafone Idea's plans are now similar to Bharti Airtel. While this move is sentiment positive, it doesn't fully resolve the telecom operator's liquidity issues.

"VIL’s weak liquidity position, despite the price hike, may force it to rationalise network investments, as evident from the lower capex intensity, which poses a risk of continued subscriber churn," analysts at Motilal Oswal Financial Services Ltd said in a report.

The report added that the recent government relief package, followed by the tariff hike of 20% may improve cash flows and attract capital. But given that a significant amount of cash is required to service debt, it leaves limited upside opportunity for equity holders, despite high operating leverage opportunity from improved ARPU, said the report. ARPU is short for average revenue per user.

Investors should note that despite some slow down in the pace of subscriber decline for Vodafone, the continuous churn in subscribers is making it challenging to sustain EBITDA. Ebitda is short for earnings before interest, tax, depreciation and amortisation.

For the September quarter, Vodafone Idea reported a net loss of 7,145 crore on a revenue of 9,406 crore. Vodafone lost another 2.4 million customers in the Q2FY22 to 253 million.

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