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Analysts say Vodafone Idea may struggle to increase tariffs post-polls

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In Short:

Vodafone Idea faces challenges in increasing revenue per user through tariff hikes after elections due to price-sensitive customers. A survey shows 42% users are averse to high tariff hikes. Vi plans to upgrade users from 2G to 4G and increase ARPU to double annual income by 2025-26. They recently raised funds and plan to borrow more for network upgrades. Vi faces competition from Jio and Airtel in the 5G market.


Vodafone Idea Faces Challenges in Increasing ARPU

Analysts are skeptical about Vodafone Idea’s plans to boost its average revenue per user (ARPU) through tariff hikes post-election, citing the price sensitivity of its customers.

Survey Results

A survey by BofA Securities found that 42% of Vi users are not in favor of significant tariff increases. Many may switch to lower-priced plans or consider discontinuing their secondary Vi connection.

Only 12% of subscribers consider Vi as their primary mobile connection, while a larger percentage opt for Reliance Jio or Bharti Airtel.

By contrast, Bharti Airtel and Jio users are more open to a 20-25% tariff hike compared to Vi customers.

Management Strategy

Vi’s CEO stated that upcoming price hikes will focus on users with higher data consumption rather than entry-level plans. The company aims to increase revenue by targeting heavy data users.

Future Plans

Nuvama Institutional Equities revealed that Vi plans to transition 2G users to 4G, implement multiple tariff hikes, and double its annual operating income by 2025-26 to handle its debt obligations.

Financial Outlook

Vi recently raised funds through equity funding and is in talks for additional borrowing to enhance its 4G and eventual 5G network capabilities. This funding is crucial for Vi to compete effectively with Jio and Airtel.

Overall, Vi’s efforts to enhance ARPU may face challenges due to customer sensitivity towards tariff increases.

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