Tariff hike may be lower for entry segment, but repair critical for reasonable ROI: Vodafone Idea's Akshaya Moondra

Vodafone Idea chief executive officer Akshaya Moondra.

Vodafone Idea's chief executive officer (CEO) Akshaya Moondra has said the tariff hike may not be high for the entry-level segment but moving to pay-more-to-use structure is critical for telcos to make reasonable returns.

Private sector telecom services providers have been talking about hiking tariffs once the Lok Sabha elections are over, saying India has one of the cheapest data rates in the world.

"We have been saying and some of our competitors have also been mentioning that some of the price recovery has to happen over some time in the form of expanding the higher pay more for using more, which has gone away from the market over the last few years," Moondra said during an earnings call on May 17. "Price increase may not be as high at the entry level."

The CEO said the price increase should focus on usage-based consumption, meaning those who use the service more should pay more.

"Tariff rationalisation on the high usage plans and moving to a price structure of paying more for using more remains critical to ensure that the operators make reasonable returns on their large network and spectrum investments," he said.

Bharti Airtel's managing director and chief executive Gopal Vittal on May 15 also raised the issue and said the architecture of pricing in India was broken and due to unlimited plans, people who can pay more are paying less.

Moondra said a tariff hike would lead to SIM consolidation. "...whenever a tariff increase happens, there would be some consolidation but that is only consolidation of dual SIMs or multiple SIMs... there is not a single user who's a user today and who stops using the service because the price has gone up.

“Secondly, logically, there is nobody who will spend less than what they are spending today, even if the price goes up," he added.

Vittal on May 15 raised the pitch for hikes, saying that “substantial tariff repair” was needed across the industry as the current levels were “absurdly low”.

“Tariff repair will need to happen across the industry. We could start it but if competition doesn't follow, it will hurt us, and that's a challenge," Vittal said during Airtel's conference call. “My own sense is that you will need substantial repairs in the industry. The right level of ARPU, even Rs 300, we'll still be one of the lowest in the world.”

ARPU is short for average revenue per user, which measures the amount of money a company earns for each customer.

Vodafone Idea  loss widened to Rs 7,674 crore in the March quarter from Rs 6,418.9 crore in the year-ago period.

Revenue increased marginally to Rs 10,606 crore from Rs 10,531 crore, the telecom company said on May 16.

Its ARPU grew marginally to Rs 146 from Rs 145 in the previous quarter (Q3FY24) and Rs 135 in same quarter last fiscal, primarily aided by change in entry-level plan and subscriber upgrades.

On May 17, the stock closed at Rs 13.25 on the National Stock Exchange, up 0.76 percent from the previous close.