MUMBAI: Telecom operator Vodafone Idea missed average revenue per user (Arpu) estimates for the June quarter as its non-4G user base had a higher dependence on physical recharge points which took a hit due to the lockdown, said the company management during the Q1 earnings call.
During the quarter, the operator also rolled out free validity extensions and top ups for almost 100 million customers of its 280-million user base, which weighed on its Arpu. While analysts had expected the company to report an Arpu of ₹119, the number came in at ₹114. In the previous quarter, the operator had managed an Arpu of ₹121, led by tariff hikes introduced in December.
The decline in Arpu also weighed on revenues, with the operator reporting a 9% sequential decline in income from operations to ₹10,659 crore during the June quarter.
"The national lockdown of retail channels heavily impacted recharges. Even a delayed recharge impacts revenue. Further, the migrant crisis led to some revenue decline. Many customers had a reduced need for recharges due to the validity extension provided by us and of course we saw a lot of connections being put in safe custody during the quarter as customers tried to reduce spending," said Ravinder Takkar, MD & CEO, Vodafone Idea Ltd.
The management said that recharges were picking pace as the nation opens up and the company has started initiating digital recharge channels to support the effort. It said Arpu needs to be at ₹230-250 for it to be sustainable for the telecom industry.
Vodafone Idea’s subscriber churn reduced to an all-time low of 2.0% (3.3% in Q4FY20), as net disconnections were lower during the quarter. Subscriber base declined 11 million to 279.8 million. 4G subscriber base was at 104.6 million, down 1% sequentially. Data volumes grew 10.6% on quarter and 40.4% year-on-year, the highest growth in the last six quarters led by higher OTT consumption.
So far, rivals Reliance Jio and Bharti Airtel have reported above-estimate performance in Arpu as well as data usage. The Vodafone Idea management said that their 2G heavy base was more susceptible to downtrading of subscription plans due to which Arpu was impacted more than that of peers.
“They (Airtel) invested in 4G ahead of us, while we are catching up and have completed our integration. Because of their early investment, 4G subscriber mix is different and as a result (their base) is less susceptible to downgrades," said Takkar.
Airtel has 49% of its user base on 4G ,whereas 37% of Vodafone Idea customer base is now on 4G. However, the management said they are looking at various strategies to upgrade subscribers to 4G.
Vodafone Idea’s Q1 sequential cellular revenue decline of 9% was well below Airtel’s 0.6% decline and Jio’s 13.3% growth. Overall subscribers as well as broadband subscribers continued to decline in Q1 unlike those of Airtel and Jio.
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