Subscriber Port-Outs to BSNL Rise at Vodafone Idea After Tariff Hikes

Vodafone Idea (VIL) has reported an increase in subscribers switching to Bharat Sanchar Nigam Ltd (BSNL) following recent tariff hikes. VIL CEO Akshaya Moondra, during the company's Q1 earnings call, noted that while these port-outs are being closely monitored, he believes decisions based solely on tariff changes may not be sustainable due to VIL's 4G coverage.

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In July, Vodafone Idea increased its tariffs by 11-24%, aligning with industry-wide hikes by larger competitors. BSNL, however, has not raised its tariffs, creating a price differential that some subscribers are exploiting. Moondra highlighted that the rise in port-outs to BSNL is a trend they are observing closely.

Impact of Tariff Hikes

Moondra mentioned that it is too early to draw definitive conclusions about SIM consolidation due to the recent tariff hikes. He pointed out that the minimal entry price increase this time might result in relatively lesser SIM consolidation. "One of the trends we have seen is that the port out to BSNL has generally risen from pre-tariff increase levels which is a space we are watching...and the reason for that is because they [BSNL] have not increased their tariffs so there is a fair amount of arbitrage," he said.

Despite this trend, Moondra expressed confidence that customers accustomed to VIL's 4G coverage might return after experiencing BSNL's current offerings. "We are watching this space - our expectation is that customers who are used to having good coverage and experience of 4G coverage, probably current offering of BSNL may not be to that extent...as people who may have taken a quick decision in terms of tariff actions...may most likely come back. But we will keep on watching this space and see what needs to be done," he added.

Future Tariff Rationalisation

In VIL's Q1 FY25 release on Monday, Moondra stated that the recent tariff intervention is a positive step for the industry. It aims to enhance return on investment and improve cash generation necessary for substantial investments. However, he also emphasised the need for further tariff rationalisation for the industry to fully cover its cost of capital.

The company remains vigilant about subscriber movements and continues to assess necessary actions. The focus remains on maintaining service quality and ensuring competitive pricing strategies amidst evolving market dynamics.

Vodafone Idea's approach reflects an understanding of market conditions and subscriber behaviour. The company aims to balance tariff adjustments with service quality to retain its customer base effectively.