Cash-strapped Vodafone Idea (VI) has taken the first step in increasing the tariffs as the telecom company struggles to retain clients and clear its pending dues. VI has increased the tariffs only in restricted circles such as Uttar Pradesh by 6 to 8 percent giving the indication that the firm has taken a cautious approach. As per a report in Business Standard, although the hike has already taken place with immediate effect the company has not made any formal announcement.

Telcos getting desperate to increase tariffs

Vodafone Idea managing director Ravinder Takkar had said in the post-earnings call in October that the firm would not back away from taking the first step in increasing prices. Sunil Mittal, the chairman of Bharti Airtel, also said last week that there was an immediate need to raise prices. The first price rise after the one announced at the end of 2019 is the latest step, even if it is nominal. The price hikes have not taken place in all 22 circles and VI has informed only those customers who will be affected by tariff hikes.

Vodafone Idea
Vodafone Idea new logo.

Analysts have argued that VI urgently needs a tariff hike as the company's finances are not faring well and it may file bankruptcy if such stern measures are not taken. One of the analysts added, "It could not have kept waiting for others to blink first." He further added any hike would be beneficial for VI to ramp up its finances.

However, some other analysts believe that such hikes would not be enough for VI to substantially increase their finances. "The hike in two high post-paid family pack plans will not move the needle as there are few customers who avail it. Nonetheless, it is a smart move by Vodafone Idea and gives an assurance to investors.

Telecom tower
{Representative Image]Reuters

The real financial impact will be seen when Vodafone Idea hikes rates in 28-84 days pre-paid plans which are availed by the bulk of its customers," said Rajiv Sharma, head of research, SBICAP Securities. The Department of Telecom (DoT) reports Rs 58,254 crore of VI's AGR dues. So far the company has paid Rs 7,854 crore. In the second quarter of the fiscal year 2021, the net loss of Vodafone Idea decreased to Rs 7,218 crore due to lower provisioning but flat sales and subscriber losses.