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Photo: Reuters
Photo: Reuters

ARPU growth and AGR dues remain top concern for Vodafone Idea

  • For the March quarter, Vodafone Idea management had said there was no material impact of the covid-19 pandemic on overall performance
  • April bore the full brunt of lockdown and Vodafone Idea lost 4.5 million subscribers, as per government data

MUMBAI : Telecom operator Vodafone Idea, which will announce Q1 results on Thursday, is expected to report 11,006.9 crore revenue and loss of 5545.9 crore for the quarter ended 30 June, according to a poll of Bloomberg analysts. The street is expected to keep a close watch on key metrics such as impact to revenue due to the lockdown as well as growth in data usage as demonstrated by telecom rivals.

Apart from management commentary on funding plans for adjusted gross revenue dues, investors will also track customer upgrades to higher data consumption plans, impact to recharges, international usage and network rollout due to the lockdown.

So far, rivals Reliance Jio and Bharti Airtel have reported above estimated performance in average revenue per user (ARPU) as well as data usage. In fact, both the telcos reported good traction from tariff hikes introduced in Q3 FY20. Airtel's ARPU increased by 22.7% since 2QFY20 and Jio’s ARPU increased by 16.9% during the same period. However, it is to be seen if Vodafone Idea, which reported 6% revenue growth in Q4 from the tariff hikes, has been able to sustain the momentum.

“Expect revenue to decline by 3.7% QoQ in Q1 as many users did not recharge due to Covid-19 related lockdown and due to continued subscriber loss. We expect subscriber loss of 15 million in Q1 compared to 12.9 million in Q4. ARPU will decline by 1.9% to 119 compared to 121 in Q4, due to Covid-19 related lockdown impacting recharge pattern (particularly for feature phone users)," noted a report by Axis Capital.

The fall in revenue may not bode well for Vodafone Idea, which is yet to clear adjusted gross revenue (AGR)-related dues totaling 50,400 crore. According to analyst estimates, Vodafone Idea will have to more than double its ARPU to pay between 5,900 and 6,200 crore annually if the Supreme Court allows a 15-year window for staggered payment.

In Q2 FY20, both Airtel and Vodafone Idea had taken massive AGR provisions after the October 2019 verdict.

In the quarter ending 30 June, Bharti Airtel made provision for Rs11,746 crore charge, primarily for incremental provision and interest related to Supreme Court’s order on AGR, so Vodafone Idea's efforts and ability to provision for AGR remains a major concern.

For the March quarter, Vodafone Idea management had said there was no material impact of the covid-19 pandemic on overall performance other than some difficulty in network rollout and customer recharge facilities. But since April bore the full brunt of lockdown and Vodafone Idea lost 4.5 million subscribers in April, as per government data, the impact of the fall in subscribers will be keenly watched.

“Data subscriber addition should grow at 1% sequentially, with total data volume on network likely to increase significantly at 10% QoQ. Since the operator has a significant amount of rural subscribers we expect minutes on the network (voice usage) to decline due to the migration (during lockdown)," said a report by Emkay Research.

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