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Vodafone Idea to do away with all low Arpu subscribers by May end
Posted on 15th May 2019
Vodafone Idea will complete the elimination of low Arpu (average realisation per user) subscribers who are paying below Rs 35 recharge plan by May end.

According to the company’s management, the telco rolled out the minimum recharge plan for most of the country in December, however, certain set of customers in some markets may not have come into the new tariff fold because of various regulatory requirements.

The management told analysts in a conference call on Tuesday that some part of the subscriber base in some segments are just beginning to be put on minimum recharge regime and all of them should end by May end.

Both Vodafone Idea and Bharti Airtel in October 2018 decided to discontinue with the recharge plans lower than `35 — a move that has improved the key operational metric of Arpu.

Post the introduction of the scheme, Vodafone Idea over the last two quarters has seen a loss of around 88 million low-paying, mostly incoming users, who recharged for less than `35 a month. Bharti Airtel has not disclosed its subscriber numbers this quarter due to the ongoing rights issue process of the company, but in Q3, it lost 48 million users.

With the substantial improvement of 16.3% in Arpu to `104 from `89 in Q3FY19 along with synergy benefits kicking in, Vodafone Idea has managed to improve its Ebitda by 57% quarter-on-quarter to `1,785 crore. However, operationally, the company continues to be on a weak footing.

Analysts observed that 4G net subscriber additions slowed down to 5.4 million in January-March 2019 versus 9.5 million in Q3FY19 and 8.4 million in Q2FY19. “This was despite an increase in 4G pop coverage to 65% from 64% in Q3FY19,” analysts at UBS noted.

Senior company officials told analysts that the whole potential of the merger is still being unleashed. Balesh Sharma, CEO, Vodafone Idea, said the company is increasing coverage, creating capacity and customer experience, especially from certain geographies where it lacks coverage. “Integration takes time, though it is moving at a good speed. We are aware that in terms of competitiveness we are not fully there. So, while you still have, for example, 65% coverage in 4G, there are certain geographies where our 4G coverage is not there and therefore, the customers when they decide to move on to 4G, we are not in consideration,” he said.

Meanwhile, on network integration, Vodafone Idea removed additional equipment on 24,000 sites out of a total of 67,000 sites for which it had converted tenancy into loading and it also exited 9,900 low utilisation sites. “Network integration resulted in a 10% q-o-q decrease in network opex. The company reported the realisation of annualised opex synergies of 60% of `8,400 crore annual opex synergies target from the merger,” analysts said.

Sharma said the company plans to complete most of its network integration by March 2020 and all of it by June 2020 and is confident of it given the progress of the first seven months.

Overall, while Vodafone Idea continues to cut costs and realise benefits from opex synergies, it also continues to lose revenue market share versus Bharti as well as Jio, analysts at Credit Suisse observed.

However, the management said the cellular revenues versus its two peers remain weak primarily because of being behind in the 4G coverage and capacity build up, and also as it has been busy completing the integration not just of the network but also the entire distribution network across the country.

The management also clarified that it is yet to take a call on the continuation of the `299 post-paid plan, which according to reports have been discontinued by the rival Bharti Airtel. Sharma said while it continues to offer `299 post-paid plan, looking at the market opportunity, it may decide to move away from it in some markets followed by the others in India.

Vodafone Idea on Monday narrowed its consolidated net loss during the January-March quarter at `4,882 crore on the back of lower operating costs due to realisation of merger synergies. Revenues during the quarter at `11,775 crore remained flat sequentially, after suffering a decline of 2.2% in the previous quarter and a 7.1% fall in the September quarter.

Related Companies: IDEA Cellular Limited   

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