Unsure of when the telecom industry will see the return of rational pricing, Vodafone Idea will leverage its asset base to improve market penetration and drive up the average revenue per user (ARPU), CEO Balesh Sharma said on Monday. Sharma added the telco would partner content providers to help push up revenues.
The country’s largest telco, with 387 million subscribers, has launched a `35 minimum recharge plan to drive ARPUs and is open to raising the price but only after doing full due diligence.
“I am not saying we will not ever increase the prices, I am only saying we have to wait. Let the plan stabilise and let us assess the sensitivities,” Sharma observed.
He believes the way to up the pricing would be to hand hold these customers from `35 to `65 and to `95. “How do you do that? For `35 you are giving them the bare minimum and when the customer wants to use more, the price needs to go up,” Sharma said. Vodafone Idea’s nearest competitor Bharti Airtel, which also offers the same minimum recharge plan, has indicated it might increase the price it to `75 or more.
“First, we want to create more capacity and coverage and slowly take these guys up rather than trying to do something more radical where these people leave us. That’s why we are going to look at the sensitivities,” Sharma added.
The ARPU of incumbent operators have plunged ever since Reliance Jio launched its services in September 2016. Consequently, the industry’s revenues which were close to Rs 1.6 lakh crore have come off sharply although customers are better off.
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At `89, Vodafone Idea has the lowest ARPU in the industry. Asked what a sustainable ARPU could be, Sharma said, “…it was `170 two years back with 1/10th the giveaway. The average data usage was 600 MB with metered voice and messages whereas now the ARPU has virtually halved and we are giving away unlimited voice and unlimited messaging. So, theoretically, if you went back to the earlier ARPU with today’s giveaways, it’s a win-win because the customer is getting ten times more and the industry can come back to reasonable health to be able to invest in the future.”
With every player losing cash, Sharma said the current pricing environment was not logical and sustainable. We don’t know when it will turn around. Our strategy is all about market penetration, price repair, play in other industries where telecom services are required,” he added.
Sharma said Vodafone Idea owns got the largest pool of spectrum in the industry where there is huge potential. “It is an underpenetrated market…there are about 700 million unique users, so you have about 550 to 600 million people who have not seen their first SIM card yet, so there is growth among the category. Also, around half the active users are using data so there is opportunity to grow revenues,” he said.
Approximately 75% of VodafoneIdea’s base of 387 million are 2G users; of the pool of 2G users in the country, Vodafone Idea has a 46% share. “We are best poised to get the next set of users if we have coverage and capacity to convert them into data users,” he said.
To better utilise spectrum, the company is using dynamic spectrum refarming which allows it to be able to use the same spectrum simultaneously for 2G and 4G. Over a period of time when users shift from 2G to 4G, the spectrum automatically gets allocated to 4G.
The telco will persist with its strategy to partner with players like Amazon and Netflix rather than produce content. Competitor Reliance Jio has most of the apps developed in-house while Bharti Airtel also has apps for music, books and films.