Rajasthan scheme helps boost Vodafone Idea's 4G user base in Q2

New Delhi | Kolkata: Vodafone Idea's expansion of 4G subscriber base by 1.8 million in the July-September period - its highest in the last eight quarters - was largely due to the company's participation in a Rajasthan government scheme to provide free smartphones and mobile connections to some 2.5 million potential female voters.

This strong growth in subscribers helped Vi report its lowest-ever quarterly decline (of 1.6 million) in user base since the Vodafone India-Idea Cellular merger in August 2018, as per company data. Vi's 4G user base grew to 124.7 million in the September quarter.

A top Rajasthan government official confirmed that Vi provided majority of the mobile connections under the state's Indira Gandhi Smartphone Yojana (IGSY) initiative, with the remaining coming from state-run Bharat Sanchar Nigam (BSNL).


"We have distributed around 2.5 million smartphones secured from the open market from most major budget smartphone brands," a senior official in the Rajasthan state government told ET. "Majority of the free mobile connections were provided by Vi while the balance came from BSNL."

Assembly elections in Rajasthan will be held on November 25.

Industry executives aware of the matter said the Rajasthan government had floated a tender three years ago, seeking bids from telcos to give out 13 million free mobile SIMs (or connections) to citizens in the state. Back then, Bharti Airtel and Reliance Jio had bagged the contract and distribution of SIMs was planned via a 60:40 split.

Eventually, the state government asked both companies to also bundle handsets with the SIMs, which led to Jio and Airtel backing out. Subsequently, the state government reached out to Vi-- in which the central government is the biggest shareholder — and state-run BSNL.

The Rajasthan government, on its part, did not go through a tendering process, and the total mobile SIMs requirement was cut to 4 million. It also hired handset suppliers to source the smartphones from the open market and mandated Vi and BSNL to supply the free mobile SIMs.

ET’s separate email queries to Vi, Airtel and Jio remained unanswered.

“Airtel and Jio were initially in the running but didn’t participate as we were looking for more aggressive data plans…the contract then went to Vi and BSNL” the Rajasthan government official said.

According to the official, the state government has now set an even higher target of distributing 10 million free smartphones with SIMs to female voters in the state, with the balance likely to be doled out if the current government returns to power. Such an exercise could potentially garner many more new 4G users for Vi, which has been regularly losing customers to Jio and Airtel.

Ever since the merger a little over five years ago, cash-strapped Vi has been losing customers every month, unable to compete effectively on the mobile broadband turf with its bigger rivals Reliance Jio and Bharti Airtel, shackled by its much delayed fundraise.

Analysts have repeatedly warned that Vi’s customer losses could get even bigger once Jio and Airtel launch 5G services nationally in a few months.

Loss-making Vi has been struggling to raise funds needed to pay vendors and the government, expand its 4G coverage and invest in its pending 5G rollout to compete effectively with India’s top two telcos.

However, CEO Akshaya Moondra had said in the Q2 earnings call that Vi expects to conclude its discussions relating to (funding from potential) equity investors in this quarter (Q3FY24). He had informed that Vi’s talks with banks were over and that the focus is on tying up the equity investment, basis which the banks would process the telco’s requests for bank funding.