Vodafone Idea purging low-value postpaid plans to boost ARPU and return to profitability

A close look at the Vodafone Idea app, company website and a call to the customer care revealed that the telco has also taken off the Rs 299 plan for postpaid users.

Vodafone Idea, India’s largest telco by subscriber numbers, has started purging low-value post-paid plans, following in rival Bharti Airtel’s footsteps, in a bid to raise average revenue per user (ARPU) and return to profitability even at the cost of subscribers.

The company, which was born out of a merger between Vodafone India and Idea Cellular, has started sending messages to its low-value post-paid subscribers, such as those on Rs 199, that they are being upgraded to the Rs 399 plan.

A recent SMS sent to an Idea customer read, “Dear customer, your current Idea post-paid plan is no longer valid from 10-July-2019.You will be upgraded to Nirvana 399 with benefits of unlimited voice calls, 40 GB high speed data and 100 L/N SMS.” The plan also includes a year of free access to Amazon Prime, Prime Video, Prime Music, besides other TV shows bundled in.

A close look at the Vodafone Idea app, company website and a call to the customer care revealed that the telco has also taken off the Rs 299 plan for postpaid users.

But VIL, in a statement to ET, said that it is still offering Idea Nirvana post-paid plans starting at Rs 299. “We have made it simpler for our customers to enjoy the feature-rich experience of our postpaid plans.”

Vodafone Idea shares ended 3% higher at Rs 13.15 on the BSE on Tuesday.

The telco has taken the cue from Bharti Airtel which recently scrapped all plans below Rs 499 and halved the total number of its offers to just four. When asked at the company’s recent earnings call if Vodafone Idea would follow Airtel, company CEO Balesh Sharma had said that the company may decide to start with a few markets first.

Experts said that India’s older telcos Airtel and Vodafone Idea — which have been reporting losses on their India mobile operations — are now willing to sacrifice subscriber numbers for higher revenue and profitability by increasing ARPU, a critical operational metric. These players are letting go of plain vanilla, low-value subscribers, as they are unable to sustain a dense, pan-India 2G network, especially as they divert the bulk of network resources — spectrum and tower assets — to 4G services to combat Jio.

Ashwinder Sethi, principal at Analysys Mason, said that these telcos are making huge capex investments and the current ARPU levels aren’t going to get them reasonable return on investment (RoI).

“Secondly, Jio has also given a sense in one last year that they are not bringing prices down further, thereby stabilising prices. And, whenever Airtel does anything, VIL follows, hence the latest move is keeping all the other factors in mind,” Sethi said.

He said that these telcos are looking to increase their average revenue per user (ARPU) to Rs 175-180 over a period of 3-5 years, which is “reasonable”.

Both Vodafone Idea and Airtel had last year started with a purge of low-value pre-paid users by launching the minimum recharge plans, starting at Rs 35, in the October-December period. The plans have worked with Vodafone Idea’s ARPU rising over 16% on quarter in the January-March period, to Rs 104, while Airtel’s gained 18% to Rs 123. However, VIL lost over 88 million users over the last two quarters while Airtel’s base has fallen by over 50 million in that time. Jio’s ARPU was at Rs 126.2.

Telecom operators’ post-paid subscriber base is around 3% of the overall subscriber base, but contribute to over 15% revenue, as per Analysys Mason.




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