Vodafone Idea narrows losses to ₹6,434 crore, revenues down, Arpu flat

Vodafone Idea’s losses narrowed to ₹6,434 crore for the quarter ended June 2024, from ₹7,674 crore the year before, while revenues shrunk marginally to ₹10,508 crore from ₹10,606 crore, even as the struggling telecom carrier recorded 12 consecutive quarters of 4G subscriber additions, taking its 4G base to 126.7 million.

The company has a total of 210 million subscribers as of June, with the balance coming from 2G and 3G. Its total subscriber base fell from 221.4 million on-year.

Average revenue per user (Arpu), a key metric of profitability, improved to ₹146, up 4.2% on-year for the No. 3 carrier, but it remained flat on a sequential basis. Amongst the telcos, Airtel is the only carrier that has seen its Arpu rise in the June quarter. No 1 carrier Reliance Jio’s Arpu was also flat this quarter.

In debt raising talks

The Aditya Birla Group-promoted carrier said that it was in talks with lenders to secure debt funding of ₹35,000 crore, which will be used for expanding its networks. 

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The loss-making telco raised ₹24,500 crore over the past few months through India’s largest FPO (follow-on public offer), giving equity worth ₹2,460 crore to its equipment vendors Nokia and Ericsson in lieu of pending dues, and issuing preferential issuance of equity shares worth ₹2,080 crore to its promoter group.

“Post the recent equity raise, we are in the process of expanding our 4G coverage and capacity as well as launch of 5G services,” Akshaya Moondra, CEO of Vodafone Idea, said in a statement on Monday.

“Some capex has already been ordered and under execution, basis which we expect ~15% increase in our data capacity and an increase in 4G population coverage by 16 million by end-September 2024,” he added.

4G coverage expansion

The capex will be channeled towards expanding 4G population coverage in 17 priority circles, 5G launch in key cities, and capacity expansion to address the increasing data demand.

“Our current capex needs are being met out of equity funds. We are engaged with our lenders for tying up debt funding towards the execution of our network expansion with a planned capex of ₹500-550 billion ( ₹50,000-55,000 crore) over next 3 years,” Moondra added.

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The carrier, along with rivals Airtel and Jio, raised tariffs by 10-21% across the board. While the larger telcos raised entry-level 5G tariff plans by more than 45%, Vodafone Idea benefitted from the overall hike in 4G tariff plans as well.

“The recent tariff intervention is a step in the right direction for the industry to move towards better return on investment, as also to improve cash generation to support the large investment requirements. However, further tariff rationalization is needed for the industry to fully cover its cost of capital,” Moondra said.

To be sure, the real impact from the tariff hikes is expected to kick in by the end of the ongoing quarter and the next quarter ending in December 2024, as per sector experts.

No more 3G

Earnings before interest, tax, depreciation and amortisation (Ebitda) for the quarter grew by 4.2% on-year to ₹4,204 crore and Ebitda margin for the quarter was 40%. Capex spend for the quarter stood at ₹750 crore, the lowest amongst peers. 

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Vodafone Idea has shut down 3G completely in seven circles including Haryana, Kerala, Maharashtra, Gujarat, Andhra Pradesh, Mumbai and Kolkata where 3G spectrum is completely refarmed to 4G. It still offers 3G services in areas such as Delhi and Madhya Pradesh.

Total debt from banks and financial institutions stood at ₹46,500 crore and optionally convertible debentures at ₹1,600 crore as of June 2024. Debt from banks and financial institutions reduced by ₹4,550 crore during the past one year, compared to ₹9,200 crore in Q1FY24.

The cash and bank balance stood at ₹18,150 crore as of June 2024. However, payment obligations to the government stood at ₹2.09 trillion, including deferred spectrum payment obligations of ₹1.39 trillion and adjusted gross revenue liability of ₹70,320 crore.