Vodafone Idea has had enough of toe-to-toe Jio battle

Vodafone Idea has contacted subscribers to confirm the end of its ultra-low-priced data tariff as it shifts towards ARPU over scale.

According to The Economic Times, Vodafone Idea is following in the footsteps of Bharti Airtel to end its lower cost data tariffs. These might be attractive to Indian consumers and do encourage the overall subscription numbers, but the dent which has been put in ARPU figures seems to be too much to stomach anymore.

The SMS states:

“Dear Customer, your current Idea post-paid plan is no longer valid from 10-July-2019.You will be upgraded to Nirvana 399 with benefits of unlimited voice calls, 40 GB high speed data and 100 L/N SMS.”

Although the telco is asking subscribers to effectively double their monthly bill, the new data plan does also include year-long subscriptions to Amazon Prime, Prime Video and Prime Music, as well as other bundled TV services.

For Vodafone Idea, this is perhaps a move which has been on the horizon for some time.

When Jio entered the market, it offered a service which drastically undercut anything from the incumbent players. This loss-leader position threw the market into chaos, with profits being slashed everywhere and telcos disappearing from the landscape. The remaining players had to create tariffs which were competitive, such was the queue of consumers waiting to switch to Jio, but they would also have to stomach significant blows on the financial spreadsheets.

What this move does suggest is that Vodafone Idea is willing to sacrifice subscriber scale, focusing on higher-value services and customers. It will see market share drop, but if there are greater profits on the horizon, investors might be happy with the outcome.

Jio is unlikely to follow suit, why would it if it is profitable at the same time as cheap, but this doesn’t mean Vodafone Idea is in trouble; there will be a market for higher value services in India and this is just a different way of doing business.

What this does suggest is that Vodafone Idea cannot tolerate the toe-to-toe battle with Jio. It seems it cannot be beaten at its own game, so perhaps it is a better idea for Vodafone Idea to carve its own niche in the Indian telco environment.

If you thought your January was tough, Vodafone Idea just lost 35mn subs

Most people consider January one of the worst months of the year, but Vodafone Idea could potentially trump your misery after reporting a year-on-year decline of 35 million subscriptions.

As is now commonplace with any CEO of a major business, Balesh Sharma was all a twirl spinning off the tough times of the quarter as positives, and in fairness there are some valid points. From a financial perspective, total revenues decreased 2% year-on-year to roughly £1.27 billion, while total subscriptions declined from 422.3 million in Q3 to 387.2 million for the last three months.

“We are progressing well on our stated strategy,” said Sharma. “The initiatives taken during the quarter started showing encouraging trends by the end of the quarter.

“We are moving faster than expected on integration, specifically on the network front, and we are well on track to deliver our synergy targets. We remain focused on fortifying our position in key districts by expanding the coverage and capacity of our 4G network, and target a higher share of new 4G customers, while offering an enhanced network experience to our customers. The proceeds from the announced capital raise will put us in a strong position to achieve our strategic goals.”

Looking at Sharma’s reasons, firstly on the revenues it might not be as bad as it looks. The most recent figures are being compared to a period where the two firms accounting policies were not aligned, while there was always going to be a bit of heavy going through the initial integration process. On the subscriptions front, the team blamed the fact that various customers consolidated spending from multiple to single SIMs.

On the 4G side of things, the total subscription base did increase to 75.3 million, up 9.5 million during the quarter, while coverage has also increased. The combined business is starting to generate notable benefits, national roaming was introduced on both networks, with each brand now offering 4G across all 22 service regions. During the three months, 11,123 4G sites were added to the network.

At first glance, this might not be the most comfortable reading, but you have to bear in mind this is a business which is starting to find its feet. Merging two businesses is never the easiest of jobs, but with the threat of Reliance Jio causing havoc everywhere Indian telco executives look, the pressure is certainly higher.

Reliance Jio has forced evolution onto the Indian telco industry, with victims scattered all over the landscape. The Telenor evacuation was first, Airtel is flagging, Reliance Communications has been decimated and the merger between Vodafone and Idea was the other major casualty. The team has to be given time to create a business which can provide suitable resistance to the Reliance Jio momentum, but Sharma will be wary he doesn’t have much.