Churn at Vodafone Idea, a leading telecom operator in India, has reached 4 percent in Q2 2024 vs 3.9 percent, 4.3 percent, 4.1 percent, 3.9 percent, 3.8 percent, 4.4 percent and 4.3 percent in the previous quarters.
For comparison, churn for Reliance Jio was 1.7 percent in Q2 2024. Churn at Airtel was 2.8 percent in Q2 2024. Churn reflects the exodus of mobile phone customers from the mobile network to enjoy better experience. Vodafone Idea customers may be feeling the pressure due to lack of investment in telecom networks.
Tanmay Gupta, Research Analyst at Motilal Oswal, in a recent report said the churn at Vodafone Idea indicates that limited network investments had slowed the customer experience, resulting in subscriber churn.
Vodafone Idea has recently enhanced its capital expenditure or Capex to INR 7.6 billion in Q2 2024 from INR 5.5 billion in the previous quarter. Vodafone Idea’s Capex for the financial year 2024 was INR 18.5 billion.
Improvement in network investment may take 2-3 years. With this, Vodafone Idea expects to restrict the subscriber churn and grow its data subscriber base. Vodafone Idea expects to invest INR 500 billion – 550 billion over the next three years towards expanding 4G coverage, 5G launch, capacity expansion, which holds significant importance.
Lack of investment in network has already reflected in poor demand for mobile data services from Vodafone Idea. Data subscribers did not grow in the recent quarter. Vodafone Idea has 136.9 million data customers, accounting for 65 percent of total subscribers. Vodafone Idea also could not enhance the number of 4G subscribers. The number of 4G subscribers at Vodafone Idea was 126.7 million, representing 60 percent of total subscribers.
ARPU grows
Vodafone Idea expects the churn rate to come down after the next quarter as the capex deployment will commence. Vodafone Idea expects entry-price subscribers would not see SIM consolidation. However, it will monitor the BSNL actions and subscriber movements.
Vodafone Idea expects the unique towers to increase to around 210-220k from 183k. There could be some exits in the existing towers, but the 4G towers could reach ~215k with the addition of 20-25k per year.
Vodafone Idea has already lowered the number of towers to 183,323 in the second-quarter of 2024 from 183,758 in the previous quarter. Vodafone Idea has also reduced the number of broadband sites (3G + 4G) to 417,245 from 430,705. But it increased the number of broadband towers from 170,530 to 170,813.
Vodafone Idea’s management team expects the unique towers to increase to around 210-220k from 183k. There could be some exits in the existing towers, but the 4G towers could reach ~215k (20-25k additions p.a.).
Vodafone Idea has experienced a continued rise in ARPU, led by the shift to 4G, higher data monetization, and an increase in minimum recharge vouchers. ARPU of Vodafone has increased to Rs 146 from 146 and 139 in the previous quarter.
Since Bharti Airtel and Reliance Jio are offering both 4G and 5G services, Vodafone Idea customers will be looking for the best options. Can Vodafone Idea stop its mobile customers to shift to alternative networks. TRAI says 12 million subscribers submitted their requests for mobile number portability (MNP) in the month of May, 2024. This shows mobile customers at all telecom operators in India are looking for alternatives.
Baburajan Kizhakedath
