Vodafone Idea’s ‘minimum recharge plans’ starts to hurt

HOME » BUSINESS » COMMUNICATION » Vodafone Idea’s ‘minimum recharge plans’ starts to hurt

When Vodafone Idea and Bharti Airtel started cutting off the incoming call facility of low-spending customers around 4-5 months ago, the idea was to force these customers to stop using one of the SIM cards for incoming only.

The idea was that if customers are forced to recharge their legacy numbers once every month for at least Rs 35, they are more likely to shift their spending back to their legacy SIMs, and junk rival Reliance Jio’s services.

However, six months on, the experiment does not seems to be going quite according to plan, going by initial commentary from Vodafone Idea management.

In its latest quarterly update, the company attributed much of a 4.3% drop in its Apr-Jun revenue to the porting out (churn) of customers who had been ‘forcibly’ shifted to the so-called minimum recharge plans in the preceding Jan-Mar (Q4) period. The company also saw a 4.2% fall in its total subscriber base in the April-June period.

“..the customer base on ‘service validity vouchers’ is yet to stabilize on a regular recharge cycle,” Vodafone Idea said in its latest update. “As a result, revenue in the current quarter was impacted by the churn of customers who had recharged on service validity plans in Q4…

“Our subscriber base declined to 320.0 million from 334.1 million in Q4FY19 primarily due to customer churn following the introduction of ‘service validity vouchers’ in the prior quarters.”

With this, the company has now lost around 102 million, or about a fourth, of its subscribers since it started cutting off incoming calls of those who failed to make monthly recharges.

“We have taken certain market initiatives to offer a better value proposition to low ARPU customers and to reduce low-end churn,” it added in its latest update.

In fact, since the introduction of the Rs 35 minimum voucher, both Vodafone Idea and Bharti Airtel had cut the minimum recharge to Rs 24 and Rs 23 respectively in January.

TOO MUCH CHURN

The latest comments also indicate that some of the reservations expressed by the company as it introduced the no-incoming policy may be coming true.

They also indicate that Street projections about Vodafone Idea’s ability to convert and retain these ‘low-end’ subscribers may have been too rosy.

In other words, customers may not be reacting to the company’s move as expected.

Instead of starting to make regular recharges every month, many may be simply ported out to Reliance Jio.

To its credit, the company management had three months ago noted that just because a customer recharged with Rs 35 in the first month or two, it did not mean that he or she will continue to do so every month.

“We have to wait and watch the behavior of these new customers because of the dynamic marketplace, and we are yet to see the behavior of the people who have taken Rs. 35 plan for the first month or two,” CEO Balesh Sharma said three months ago when asked what percentage of such forcibly converted customers chose to stay on.

At the same time, he had also projected that while some of Vodafone Idea’s customers would choose to leave the company, they would be partly compensated by an influx of customers from Bharti Airtel, which too had adopted a similar no-incoming-calls strategy.

“Given our market share, we would have gained in one of the two brands, but some of them could have chosen another service provider. Likewise, because simultaneously there was a change done by one of my competitors, there also I would have gained with the SIM cards consolidation on our network,” he had said.

However, this seems to have been an optimistic expectation, going by the continued loss of subscribers by both Bharti Airtel and Vodafone Idea, which suggests that far more customers are consolidating their usage on Reliance Jio than on these two networks combined.

(Now you can get topic-based alerts via WhatsApp)


Get all Telecom news from Ultra News via email:

Don't forget to click on the activation link we send to your email