5G Should Be Priced at Premium to 4G With More Data, Overall Tariffs Expected to Rise, Vodafone Idea MD Says

Vodafone Idea said it spent a significant amount in acquiring spectrum in the recently-held auction which calls for a need to charge a premium for 5G services.

By Press Trust of India | Updated: 5 August 2022 01:34 IST

5G Should Be Priced at Premium to 4G With More Data, Overall Tariffs Expected to Rise, Vodafone Idea MD Says

Vodafone Idea acquired spectrum worth Rs. 18,800 crore in the recently concluded auction

Highlights

Vodafone Idea expects 5G to be priced higher than 4G plans in India
The operator said network investment was impacted due to liquidity issues
Vodafone Idea's ARPU increased 23.4 per cent year-on-year

Debt-ridden Vodafone Idea expects 5G to be priced at a premium with more data bundled with plans compared to 4G services at present, a top company official said on Thursday. Vodafone Idea (VIL) Managing Director and Chief Executive Officer Ravinder Takkar, during an earnings call, said the company has spent a significant amount in acquiring spectrum in the recently-held auctions which calls for a need to charge premium for 5G services.

It expects overall tariff for mobile phone services to go up by the year-end.

"Given the fact that a fair amount of money has been spent on spectrum, we believe that 5G should be priced at a premium to 4G. You can price it at a premium, but of course within that premium you could have a situation where a number of gigabytes that you get are more because you are consuming potentially more, given the extra bandwidth that you get in 5G," Takkar said.

Samsung Wins Patent for a Tri-Fold Smartphone With Specialised Barrier Layer for Improved Durability

He added that the increase in data consumption on the 5G network will depend on use cases that are developed and adopted by consumers.

Vodafone Idea acquired spectrum worth Rs. 18,800 crore which includes radiowaves in the mid band (3300 MHz band) in 17 priority circles and spectrum in 26 GHz band in 16 circles for 5G services. The company also acquired additional 4G spectrum in three circles of Andhra Pradesh, Karnataka and Punjab.

The fresh spectrum bid adds an annual installment liability of Rs. 1,680 crore on the company.

5G Spectrum Auction: Reliance Jio Becomes Top Spender Among Leading Telcos

VIL has posted marginal narrowing of its consolidated loss to Rs. 7,296.7 crore for the June quarter compared to the year-ago period, as tariff hikes boosted its realisations. The telco's loss stood at Rs. 7,319.1 crore in the year-ago quarter.

VIL's revenue from operations grew to about Rs. 10,410 crore in the quarter ended June 30, 2022, improving nearly 14 per cent from the year-ago period.

Its Average Revenue Per User or ARPU — a key monitorable for telecom players — stood at Rs. 128 per subscriber for the quarter, compared to Rs. 104 in Q1 FY22. This represented an improvement of 23.4 per cent year-on-year, helped by tariff hikes.

5G Spectrum Auction Concludes on Monday, India May Launch Services by October

"Just to summarise that on the 4G pricing, I think there is certainly an opportunity based on the value that has been continuously provided to the consumers and how the first few price increases have been absorbed in a seamless manner, I think there's an opportunity to do that soon," Takkar said.

He also said the investment in the company's network has been impacted due to liquidity issues.

VIL's Chief Financial Officer Akshaya Moondra said the company has strategically placed bids for spectrum and its ongoing fundraising plans include capital expenditure calculation for the 5G network.

The debt-ridden firm said there is positive momentum in its fundraising exercise with promoters' recent investment in the company.

At the end of the April-June 2022 quarter, VIL's total gross debt (excluding lease liabilities and including interest accrued but not due) stood at Rs. 1,99,080 crore, comprising of deferred spectrum payment obligations of Rs. 1,16,600 crore, AGR liabilities of Rs. 67,270 crore that are due to the government, and debt from banks and financial institutions of Rs. 15,200 crore.

Moondra said the company has cleared a lot of bank debt and the Department of Telecom (DoT) has returned a bank guarantee worth Rs. 17,000 crore.

"We are engaged with the bank that our exposure has come down. Look at our external debt and EBITDA, we are in a very fairly comfortable position. There is a fairly long moratorium to service the government's debt. Banks understand this and based on our discussion with them, we should be able to take it to a conclusion in the near future. We will be taking new debt primarily for investments," he said.

Talking about conversion of interest into equity allocation to the government, Moondra said the company has confirmed an amount of Rs. 16,130 crore to the DoT and final confirmation from the department in this regard is awaited.

The government is expected to get around 33 per cent stake in VIL once the conversion of interest into equity is confirmed.

Should you buy a 4G or 5G budget phone? We discuss this on Orbital, the Gadgets 360 podcast. Orbital is available on Spotify, Gaana, JioSaavn, Google Podcasts, Apple Podcasts, Amazon Music and wherever you get your podcasts.

Affiliate links may be automatically generated - see our ethics statement for details.

Comments

For the latest tech news and reviews, follow Gadgets 360 on X, Facebook, WhatsApp, Threads and Google News. For the latest videos on gadgets and tech, subscribe to our YouTube channel. If you want to know everything about top influencers, follow our in-house Who'sThat360 on Instagram and YouTube.