Vodafone Idea (Vi) is in a precarious position right now. The telco needs to time its move for tariff hikes perfectly, or else it will lose a ton of its subscribers to Reliance Jio and Bharti Airtel. One thing is for sure; Vi isn’t going to wait as long as Jio and Airtel to push for tariff hikes. However, to mitigate the effects of losing subscribers because of tariff hikes, the telco can bank on converting its 2G or 3G subscribers to 4G and increase its overall 4G subscriber base. At the same time, the tariff hikes aren’t going to help the operator a lot when it is trying to covert its legacy network users to 4G.
Vodafone Idea Might Not Be Able to Attract 2G/3G Customers of India
All the telecom service providers (TSPs), including Vodafone Idea (Vi), has a potential market of legacy network users waiting to be upgraded to 4G services. Like we reported a few days back, both Airtel and Vodafone Idea can bank on this opportunity and add more users to its 4G subscriber base for giving Reliance Jio a tough fight. But the potential tariff hikes might turn Vi’s dream of gaining more 4G subscribers to dust in the near term. If the telco is going to introduce tariff hikes very soon, it has very little time before it can upgrade its 2G/3G subscribers to 4G.
Why Vi Needs to Make Conversion of 2G/3G Subscribers to 4G Fast?
Legacy network users didn’t upgrade to 4G until now because of multiple reasons, including; a) 2G/3G is cheaper than 4G, and b) they never required the 4G speeds. Today, consumers are smarter than they have ever been because they are more aware of their needs and understand the applications of a different generation of networks. Thus, Vi will have to exercise its creative marketing brain and come up with a solution very fast in order to motivate legacy network subscribers of its own user base in addition to subscribers of Airtel and Bharat Sanchar Nigam Limited (BSNL) for upgrading to 4G. This might include the introduction of new entry-level 4G plans that are cheaper and can fulfil the calling needs of the customers. Vi has been tremendous in the last few months with introducing new offers and plans, so there’s still hope for the telco. All of this because when the tariff hikes kick in, the telco is expected to lose more subscribers, and if it doesn’t add a few users at that time, it can become a serious issue for the company. Further, it will only be able to add new 4G users from its legacy network user base when it offers plans at the price which are near to what Jio and Airtel does. Otherwise, the users would just shift to Airtel or Jio. Neither Airtel nor Jio will increase tariffs anytime soon. So Vi needs to time its decision of tariff hikes very carefully.
Vi’s Financials Will Improve If It Coverts Legacy Network Users to 4G
Vodafone Idea will be able to earn more from its existing subscriber base when the tariff hikes kick in. At the same time, it will earn from all the new subscribers it gained by converting the 2G/3G users to 4G. It will impact the average revenue per user (ARPU) of the telco in a positive manner. Once it converts the subscriber addition and ARPU curve to positive, the telco will gain the confidence of the institutional investors and raising capital would become an easier task. At the same time, the operational costs of the telco would boil down since it won’t have to maintain networks of different generations. Vi has already been refarming the 3G spectrum to 4G in multiple circles, so it has a greater network capacity than ever to serve all the new customers.
