Industry-wide tariff correction is required to lift average revenue per user (APRU) so that the industry can generate sufficient returns to make future investments, Vodafone Idea (Vi) Chief Executive Officer Akshay Moondra said on April 15.
“Tariffs have been at a level where industry can return its cost of capital. India's ARPU is the lowest of all major countries globally and one-third of China, a comparable country. Data usage has grown 82 times over the last seven years, while voice usage has grown 2.6 times. However, ARPU has grown only 1.24 times. This is a common understanding that ARPU needs to go up,” Moondra said at Vodafone Idea's FPO press event in Mumbai.
He added, “Large tariff corrections are required so that the industry reaches a point where it generates sufficient returns to make future investments.”
He, however, didn’t share Vodafone’s idea of hiking telecom tariffs for its subscriber base. “We have some expectations, but I cannot mention them now. We have seen the size of tariff increase in the past, that should be reasonable.”
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The executive said that India's telecom story is great with the right market structure, tariff corrections, and subscriber upgradation. “There is also a great India story with population growth and telecom penetration well below global levels.”
Vodafone Idea, he said, is a strong brand with great brand loyalty and strong promoters. “With this round of funding, we will be able to return to participating in the industry growth, which has not been possible before.
The Indian government is the company's single largest shareholder and credit provider. “It provides a strong platform for taking things forward with this round of funding.”
Moondra said that Vodafone Idea is looking at a strong line-up of anchor investors who will be unveiled late Tuesday.
The government's conversion of debt into company's equity has brought strong investor confidence which shall bring a turnaround to the company's much laggard funding initiatives, the chief executive said.
The Union government is the largest shareholder of Vi, holding around 32 percent of the company. Post the equity dilution in the current round; its share will be reduced to 24 per cent, which is a comfortable range for the government to extend a reform package in FY26 further when the moratorium period of spectrum payments comes to an end, Moondra said.
Analysts predict that the Indian telecom industry will see a 15–17 percent tariff hike after the general election around July-October, with Bharti Airtel taking the lead. The last hike of about 20 percent was in December 2021.
Analysts at Antique Stock Broking said that the Sunil Mittal-led telco will be the biggest beneficiary of the tariff hike as it will be able to increase its ARPU to Rs 286 by the end of FY27, up from the current Rs 208. They said that the telco’s subscriber base will also grow at 2 percent per annum as against industry growth of 1 percent per annum.
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