Before Vodafone Idea FPO, CEO says Indian ARPUs amongst lowest in the world

Vodafone Idea’s CEO Akshaya Moondra, in an exclusive interaction with CNBC-TV18 a day before the telco’s follow-on public offer (FPO) opens, rued that ARPUs, or average revenue per user, in India are amongst the lowest in the world, and by a huge margin.

According to Moondra, none of the telecom players are currently yielding returns on their cost of capital, given the existing ARPU levels.

“A tariff correction is imperative just to get a return on the cost of capital,”  Moondra said, adding the market could potentially absorb price increases similar to those observed in the past, around 20%, without significant repercussions.

Vodafone Idea has been consistently losing subscribers. According to data from the Telecom Regulatory Authority of India, Vodafone Idea lost 15.2 lakh subscribers in January. The management had earlier mentioned it has 215 million subscribers.

Moondra attributed the company’s disproportionate loss of subscribers to insufficient 4G coverage. Nevertheless, he conveyed optimism about stemming the subscriber loss and actively contributing to the industry’s growth. Additionally, he anticipates a swift expansion of 4G coverage.

Vodafone Idea Ltd.’s ₹18,000 crore follow-on public offer (FPO) opened for subscription on April 18. The company plans to allocate more than two-thirds or 70% of the funds raised towards capital expenditure to bolster its network infrastructure and expand its market presence.

Moondra told CNBC-TV18 that ₹5,720 crore of the total fundraising will be used in the 5G rollout. He added that the money raised would be enough to fund capex plans for the next three years.

The 4G investment of ₹7,000 crore will be “roughly equally split between 4G coverage expansion and 4G capacity growth.”

Vodafone Idea has fixed the FPO price band between ₹10 to ₹11. The stock has risen 113% over the last 12 months.