MUMBAI :Indian telecom operator Vodafone Idea pulled off a 11% jump in average revenue per user (ARPU) to report 6% growth in quarterly revenue ahead of analyst estimates. According to analysts Vodafone Idea was expected to report around 3-4% gains in average revenue per user (ARPU) during Jan-March to bring it up to ₹113 however ARPU for Q4 improved to Rs. 121 instead, driven by the prepaid tariff hike effective from December 2019.
Earnings before interest tax depreciation and amortization (Ebitda) grew 16% after adjusting for exceptional items, and reflected the benefits of tariff hikes said brokerages.
In Q4, Reliance Jio and Bharti Airtel’s Q4 ARPU grew by 1.7% and 14.1% QoQ respectively. But unlike Vodafone Idea which lost 4% subscriber base during the quarter, the other telcos grew ARPU on an expanding user base.
“Between all the three operators, Bharti Airtel gained the highest revenue market share for the quarter. However, as Airtel management also pointed out, the industry ARPU is still not good enough to service AGR dues and a lot of it will depend on when the next wave of tariff hikes can be implemented, subject to outcome of floor pricing decision as well but currently the other two telcos are still better placed for growth than Voda-Idea," said Keshav Lahoti, associate equity analyst, Angel Broking.
The operator reported ₹11,644 crore loss for the quarter. Loss increased due to exceptional items recorded of ₹6,141 crore mainly pertaining to license fees and spectrum charges. Overall, Vodafone Idea's result was better than street estimates in terms of revenue, ARPU, EBIDTA and EBIDTA margins.
Compared to previous quarters the rate of 4G subscriber addition also slowed down in Q4 to 1.3% compared to 8% and 13% in the preceding quarters. For Vodafone 36% of the user base are 4G subscribers compared to 40% of Airtel customers. Further, pre-paid subscriber base has remained flat at 92.1% showing little progress with premium subscribers.
“With continued subscriber churn, especially in the data market and weakening competitive position, revenue growth through price hike is getting diluted. Against this, Voda-Idea has incremental network investment requirements, which may turn out to be a tall task ahead," said a report by Motilal Oswal on Wednesday.
Already, the upfront payment of ₹6850 crore towards AGR dues, coupled with the cash burn in Q4, has led to a further increase in net debt. As of 31 March, Vodafone Idea’s net debt stood at ₹1.125 trillion, up from ₹1.033 trillion at the end of December. At the current growth rate, analysts are still sceptic about how far the operator will be able to shore up ARPU following the economic impact of the covid-19 pandemic. Although, in Q1, the telcos will still experience some remaining ARPU growth from December tariff hikes as users on longterm plans scale up.
Even if telcos are allowed staggered payments over 20 years, analysts have estimated that Vodafone Idea’s ARPU will need to cross ₹200 by FY23 for being able to service the ₹50,000 crore government debt.
The Vodafone Idea management maintained that their ability to continue as going concern is essentially dependent on a positive outcome of the application before the Supreme Court for the payment in installments and successful negotiations with lenders.
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