Vodafone Idea may soon opt for tariff increases, but this time, instead of raising the prices of prepaid services, the telecom company could raise the price of postpaid plans. Analysts believe that telecommunications companies are hurting their business only if they do not proceed with the increase in postpaid rates.
Synopsis
- Vodafone Idea (Vi) requires full-fledged money, be it rate increases, fundraising or loans.
- Vodafone Idea may soon opt for tariff increases, but this time, instead of raising the prices of prepaid services, the telecom company could raise the price of postpaid plans.
- Motilal Oswal, through a recent report, has already highlighted that the telecommunications company must stop the rate of abandonment of subscribers.
Vodafone Idea (Vi) requires full-fledged money, be it rate increases, fundraising or loans. While the telecom company's debt was effectively reduced by converting a significant portion of the statutory taxes into capital for the government, there remains the question of the money needed to launch 5G, a debt of Rs 1,900 crore on the books and the expansion of the 4G network.
The telecom company has been losing buckets of customers with each passing quarter, and analysts say the main reason behind this is the telecom company's inability to aggressively invest in its networks. So will Vodafone Idea still bet on rate hikes? It might, and here's what you need to know.
Vodafone's idea could raise tariffs soon
Vodafone Idea may soon opt for tariff increases, but this time, instead of raising the prices of prepaid services, the telecom company could raise the price of postpaid plans. Analysts believe that telecommunications companies are hurting their business only if they do not proceed with the increase in postpaid rates.
Since there is a very small percentage of the population using postpaid services, raising postpaid rates may not increase overall revenue by a huge margin; it will still make some difference.
Motilal Oswal, through a recent report, has already highlighted that the telecommunications company must curb the rate of abandonment of subscribers. To do this, the telecommunications company needs money to invest in the networks.
According to Motilal Oswal, Vodafone Idea needs an increase in average revenue per user (ARPU) of at least 1.9 times to reach a level of self-sufficiency and this requires a tariff increase. Revenues of telecommunications companies must increase at least 3x from now.
If it is not happen, despite all the help, Vodafone Idea will see lot of difficult to stay afloat in the long run. The government will now also be looking for rate hikes to ensure its stake in the company is worth something at the end of the day.
