Vodafone Idea Ltd’s shares are hanging by a thread and its future depends largely on relief from the government, now that any concession from the courts seems to be ruled out. But as it’s said, as long as there is life, there is hope. So, Vodafone Idea is putting its best foot forward, despite the many odds it faces.

It reported a 2.3% sequential increase in revenues to Rs11089 crore, which is impressive in the context of its weaker balance sheet and relatively poorer network. The revenue growth was the highest since the merger between Vodafone India Ltd and Idea Cellular Ltd in 2018.


According to an analyst at a domestic institutional brokerage, there were large shifts in interconnect usage charges (IUC) related revenues and payments last quarter, after Reliance Jio Infocomm Ltd started charging a nominal fee for calls made outside its network. Adjusted for this, subscriber revenue rose by more than 3% for Vodafone Idea, which is only slightly lower than Jio’s adjusted revenue growth of about 3.5%, he adds.

Also note that for the first time in many quarters, Vodafone Idea reported an increase in its post-paid subscriber base as well as the number of data subscribers.


“Based on the 21 million 4G subscriber adds in Q3 (well above the 8-9 million normal run-rate), it is evident that Bharti benefitted from Jio’s move to charge for IUC (at least on the subscriber and revenue fronts)," analysts at IIFL Institutional Equities had said in a note to clients last week.

Likewise, Vodafone’s broadband data subscriber base saw a higher-than-usual jump last quarter. Its data volume growth was also decent at 8.5% compared to Q2.

Of course the growth pales in comparison to Airtel, which clocked 15% data volume growth. Even so, the results show signs of recovery at the company.

Earnings before interest, tax, depreciation and amortisation (Ebitda) rose over 16% to Rs1280 crore, after excluding the impact of the new Ind AS 116 related change.


Note that the company is yet to fully realize the benefits of the recent tariff hikes. “The tariff increase had limited impact on this quarter’s revenue," Vodafone Idea said in a statement.

The good news ends there. To start with, the improvement is off a very low base. EBITDA margins are less than 12% and the company’s average revenues per user (Arpu) stood at only 109 last quarter. According to Airtel, Arpu needs to rise to the 300 levels for the industry to realize decent double digit (15%) return on capital employed.

While the wait for further tariff increases continues, Vodafone Idea’s balance sheet is getting progressively worse. Its cash and cash equivalents stood at Rs12530 crore in end-December, down from Rs21180 crore in end-June.


And Vodafone’s net worth has fallen from Rs69540 crore a year ago to merely Rs17623 crore at the end of the last quarter. At this rate, the company will have a negative net worth in about a year, notwithstanding the tariff hikes taken last year, says the analyst quoted above.


Vodafone Idea’s immediate survival depends on some relief on its regulatory dues of over Rs44000 crore. With the Supreme Court refusing to budge from its position, the only hope appears to be some intervention from the government, although it’s not clear whether any help can or will come.

But even if some relief comes, survival in the long run would involve many more things falling in place, starting with adequate recapitalisation of the company.

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