Is price hike the new life support for Vi?

It seems Vi has decided to step up the game that it has long played with Airtel and Jio. They’ve hiked tariffs for prepaid mobile plans by 20–25%, and what’s
surprising is that this comes just months after they almost doubled their base 4G packs from ₹49 to ₹99. So why is Vi shifting to a more profitable approach rather than saving its already plummeting subscriber base? To answer this question, we’ll have to go back in time and explore the struggles that they’ve had in the last 5 years.

An Idea can change your life. This was the tagline of Idea Cellular, which was one of India’s largest telecom service providers back in 2014. But ideas can also
backfire, and when they do, especially in business, things are usually bound to go downhill. This started in 2015 when Jio entered the telecom industry with a bang.

It offered 4G services at extremely low rates to consumers. In fact, it was so low
that it was hard to even believe they would make profits out of it. But little did
everyone know that it was a game-changing plan for Jio to gain their subscriber
base in a short time. This led to millions of subscribers leaving Airtel and Idea and immediately switching to Jio.

While this was all good news for Jio, the other players in the market were having a tough time. Losing subscribers means losing recurring revenue, and when revenue falls short, the company goes into losses. To overcome this, Airtel and Idea tried to reduce their tariffs to lure back their lost subscribers. A few of them returned, but a large chunk of their subscriber base remained with Jio.

Idea Cellular and Vodafone India then took a major decision in 2017, to merge
together as one single company and take on the rising dominance of Jio in the
country. This merger did help them brag about their large subscriber base and
revenue, but it only lasted for a brief time. In 2018, Vodafone and Idea together
had a subscriber base of 408 million, but by September 2021, this plummeted to 253 million.

In 2019 came the infamous AGR fee issue. Back then, telecom operators were
required to pay a predetermined cost in order to get a telecom license, also
called an AGR Fee. However, this figure was so high that most people couldn’t
generate the financial clout to make the initial deposit. Hence, the government
switched to a different model and began collecting a modest cut of their revenues. Vi was already making deep losses, and all they could ask for was to
postpone their cut under certain conditions.

It’s been 2 years since then and Vi now owes a total debt of around 1.8 lakh
crores. What’s more shocking to know is that it only has cash reserves of around 250 crores! The telecom industry runs on expensive equipment, and to buy them, companies need huge investments. When you have too much debt and very little money on hand, it becomes almost impossible to invest in the future.

All that can be said right now is that Vi is treading on rough roads with a pile of
debt. The price hike may be of little support, but much is needed to cover all its
expenses while also providing good service to its existing customers.

That is all for now. See Ya!