Vodafone Idea officials admitted that the outflow of customers from the network after the company started blocking incoming calls of low-use customers has been more than what they had expected.
“The churn has been higher than what we thought it will be,” CEO Balesh Sharma said in Monday.
Sharma also admitted that the company is often not seen as having competitive plans in extremely price sensitive, unlimited plans.
Starting about seven months ago, Vodafone Idea had started turning off the incoming call facility of customers who were not making any recharges, and asked customers to recharge with at least Rs 35 per month to keep getting incoming calls.
While the initial response was largely along expected lines — a large chunk of users recharged with 35-rupee vouchers — the company soon found that a large portion of these customers were leaving the network after a couple of recharges.
As a result, the biggest damage to the company’s finances from the move came during the just concluded April-June period (Q1), even though the new system was put in place around December last year.
In the first three months (January to March) after the plans were introduced in December, the company saw a drop of 22.5 million in the number of switched on (VLR) subscribers on its network. However, in the next three months (April-June), Vodafone Idea has sustained a loss of 45.9 million VLR subscribers.
For Rs 35, the company offers a talk time of Rs 26 along with incoming calls for 28 days. In comparison, Reliance Jio offers unlimited outgoing and incoming calls for Rs 49.
The disparity is partly because of the high cost of running Vodafone Idea’s networks. The company has been optimising its network over the last six months by removing unnecessary and duplicate equipment and integrating the Vodafone and Idea network into one to save costs.
The process, expected to be complete in another 6-9 months, is ultimately expected to help it to offer cheaper plans and tariffs that make it competitive.
“We tried to understand why they’re leaving us after a couple of recharges,” Balesh Sharma said.
Customers do 2,3 or 4 recharges in the 35-rupee-plus category, he said, “and then they get into a value seeking mode and start comparing and see, is life better with going to an unlimited plan, and in that situation, when they go to the market, in many markets, given our integration still happening — either in reality or in perception — we are still not on top, and therefore the choice may be made for us or against us,” he said.
In the unlimited market, he said, “the odds remain stacked against us.”
The company also noticed that often, customers who recharge for Rs 35 and get Rs 26 talk time do not bother to use the talk time at all, but rely on their second SIM to make outgoing calls.
In other words, customers simply did not see Vodafone Idea’s call rate of Rs 1.5 per month on the plan as something they could live with.
While those with a second SIM continued to use that for making calls, said Sharma, those without a second option found the call rates too high to be affordable.
“Our feedback has been that the value on the 35 rupees and 65 rupees voucher was not what the customer was used to, or expecting,” Sharma said.
“Second, we learnt that if we don’t put a cap on the benefits that we give as part of the 35 rupee voucher if he’s an incoming-only subscriber, he doesn’t even burn the benefits of this 35-rupee voucher.”
“Those who are relatively serious users of this product want more value. Those who are not, despite 35 rupees being there as the minimum recharge, continue for longer than one month using the balance that the 35 rupees gives by using it purely for incoming.”
Sharma said the company plans to address the situation by offering a Rs 45 voucher. The Rs 45 voucher would be comparable in price to a Rs 49 voucher from Reliance Jio.
The Rs 45 voucher, besides opening incoming calls once again, also comes with 4,500 seconds, or about 75 minutes, of outgoing calls.
Like the Jio recharge, the 45-rupee plan will expire after 28 days, and customers will not be able to carry over the privileges or minutes to the next month.
“The new product of 45 rupees..on the one hand, gives the customer a lot more, and on the other, requires him to use all the benefits that we give within the 28 days,” Sharma said.
Thanks to this new recharge, said Sharma, “a customer who is using the recharge for both incoming and outgoing..may not seek to go in for an unlimited plan as he gets sufficient talktime, as high as 70 minutes.”
In other words, since he or she is not interested in an unlimited plan, he or she is more likely to stick with Vodafone Idea, according to the company’s thinking.