Vodafone Idea (Vi) has unveiled a new strategy to boost its subscriber base by introducing free international roaming (IR) across a range of its postpaid, annual prepaid, and corporate plans. This marks a significant shift, as free IR is now a standard inclusion rather than a paid add-on, a move keenly observed by market analysts.
Nomura, the foreign brokerage, acknowledged Vi's aggressive offering, noting that it's a departure from the current industry trend of bundling OTT, software, or AI subscriptions. While such inclusive international roaming has been common in markets like the US and EU for years, its mass-market introduction in India by Vi is a first.
Nomura Maintains 'Neutral' Rating on Vodafone Idea
Despite the innovative offering, Nomura has maintained its 'Neutral' rating on Vodafone Idea. The brokerage cited Vi's significant valuation premium compared to Bharti Airtel Ltd and its persistently stretched cash flow situation as primary concerns. Nomura projects a slightly higher 15 percent EBITDA CAGR for Vi, attributed to a lower base and improving operational metrics, but still designates Bharti Airtel Ltd as its top pick among Indian telecom stocks.
Strategic Implications for Subscriber Growth and Rivals
Nomura believes Vi's new strategy is primarily aimed at attracting premium customers from competitors, particularly Bharti Airtel and Jio. For existing prepaid users, the free international roaming, available only with annual plans, could incentivize a shift to longer-term recharges. This could help Vi reduce churn and improve its working capital, a crucial need given its financial constraints.
The brokerage views this as a "smart move" focused on subscriber retention and growth, even if it means a slight sacrifice in average revenue per user (ARPU) in the short term. However, overall revenue could see a positive impact from increased subscriber traction.
Impact on Bharti Airtel and Market Dynamics
Nomura highlighted that Bharti Airtel is most exposed to the potential shakeup from Vi's new offering. International roaming revenue typically constitutes a small fraction (1-3 percent) of overall carrier revenue for Indian telcos. However, with Bharti Airtel having a higher percentage of postpaid subscribers (8 percent vs. Vi's 6 percent excluding M2M), it stands to lose more if bundled IR becomes an industry norm.
Vi's decision not to respond to Airtel's plan restructuring in mid-August further suggests its current focus is squarely on subscriber growth rather than ARPU expansion. While minor revenue losses may occur for telcos in the near term, Nomura anticipates that with industry subscriber growth largely saturated, all three major players will eventually seek to earn more from existing users through premiumization. Bharti Airtel is expected to observe the market response before potentially launching similar bundled plans.