Industry needs to raise tariffs at regular interval, says VIL in annual report

“The company thus believes that the industry will have to further raise tariffs at regular intervals, which is essential for operators to generate reasonable returns on their capital employed and support future investments, including new technologies,” the company said.

Industry needs to raise tariffs at regular interval, says VIL in annual report
The joint venture of Aditya Birla Group and Vodafone Group had got a fresh lifeline last year after the government extended a relief package to the sector.

The industry needs to raise mobile tariffs at regular intervals as the sector still operates at unsustainably low prices and revisions will allow it to generate reasonable returns and support future investments, the debt-laden Vodafone Idea said in the company’s annual report for 2021-2022.

The telecom operator said that the revenue per user remains lower than historic trends, despite all the players — Bharti Airtel, Reliance Jio and including itself raising tariffs in the last year. “The industry still operates on unsustainably low tariffs,” Vodafone Idea said in the annual report.

The joint venture of Aditya Birla Group and Vodafone Group had got a fresh lifeline last year after the government extended a relief package to the sector.

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“India continues to have the lowest tariffs globally, while the proliferation of unlimited data bundles has led to India having one of the highest data usage (per subscriber) in the world,” it said. The average revenue per user (ARPU) levels remain lower in comparison to historic trends, despite consumers getting much more value in terms of unlimited voice and daily data allowances, compared to five years ago.

VIL said its priority remains on driving ARPU improvement. “During the year, the company has taken several tariff interventions specifically, effective November 25, 2021, we increased the prepaid tariffs across all price points including unlimited plans as well as combo vouchers. All these initiatives are ARPU accretive — benefits of which are reflected in ARPU improvement from Rs 107 in Q4 FY21 to Rs 124 in Q2FY22. While all these tariff interventions are steps in the right direction and will help in improving the ARPU, however, such changes are not material enough to solve the structural issue that the industry is facing,” the debt-ridden telecom operator said.

“The company thus believes that the industry will have to further raise tariffs at regular intervals, which is essential for operators to generate reasonable returns on their capital employed and support future investments, including new technologies,” the company said.

The firm is currently in discussion with lenders and investors to get the requisite equity and/or debt funding which will enable it to restart the capex cycle and move towards the growth journey in line with its long-term strategic intent. In the recently concluded spectrum auctions, the company acquired 5G spectrum in its priority circles covering 98% of its revenue base, which will strengthen its competitive position.

“The consolidation of the industry to three large private operators and one government operator positions the surviving operators well to benefit from the growth opportunities on the back of India’s digitalisation trend,” VIL said in the annual report. It added that the company is taking appropriate steps to grow its revenues further and thus reduce losses/earn profits by following a well-defined strategy.

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