Delay in rolling out 5G may hurt Vodafone Idea badly

Mumbai: The absence of 5G has begun to hurt cash-strapped Vodafone Idea’s key performance indicators, especially the per-capita data consumption of its subscribers, and could lead to loss of core high-paying customers in the coming quarters, analysts said. While both Vodafone Idea (Vi) and Bharti Airtel showed flat quarter-on-quarter growth for per-capita data consumption, the latter’s aggressive push for 5G service expansion in the country is expected to raise this metric up significantly over the next 12-18 months, they added.

“Airtel launching 5G in a meaningful way (since October 2022) means that it will see a proliferation in 5G subscribers over the next few quarters. Data consumption for 5G users is 2.5x of 4G users, which will accelerate growth in per-capita data usage for Airtel,” Rohan Dhamija, head (India & Middle East) at Analysys Mason, said.

As of March 31, 2023, Vi’s per capita data consumption stood at 15.1 GB while Airtel’s was 20.3 GB. Both showed flat on-quarter growth in this regard. Over the next 12-18 months though, Vi’s per-capita data consumption is expected to touch 20 GB, while Airtel’s is estimated to touch 30 GB.

Market leader Reliance Jio is already seeing the impact of 5G users on data consumption with a spike in per-capita data usage. For the March quarter, this metric stood at 23.1 GB, up from 22.4 GB in the fiscal third quarter. Over the next 12-18 months, this number is expected to well exceed 30 GB.

Airtel and Jio started the phased launch of their 5G services in the country in October 2022, and over the last six months have ramped up efforts to cover as much of the country as possible. Both intend to have extensive 5G coverage by March 2024, indicating that time is running out for Vi to start its 5G campaign.

Vi’s inability to push data consumption on its network could have multiple consequences, ranging from a slowdown in average revenue per user (ARPU) growth to increased churn in the long run.

“Data consumption is key to improving ARPU in the long run. All telcos now offer free voice minutes with their plans. Data top-ups will be key in driving ARPUs while we wait for headline tariff hikes,” said Pareekh Jain, chief executive, EIIRTrend, a research firm.Lagging on the 5G rollout by more than three quarters as compared to its peers also means that Vi stands to lose customers even after launching the next generation telecom technology on its network as the quality of service will be compared to the already established networks of its peers.

After launching 5G, the network will take at least two quarters to settle. By this time, Airtel and Jio 5G networks would be running efficiently, meaning Vi could lose customers to peers because of poor 5G service as well, added Jain.