Vodafone Idea's June-quarter results suggest that the long-awaited turnaround may finally be taking shape, even as funding risks persist. Reversing years of customer losses, it reported an addition of 0.3 million subscribers in Q1 FY27, a first since the 2018 merger, taking its total subscriber base to 193 million. Vodafone Idea had 198 million subscribers a year ago.
Revenue grew 6% year-on-year to ₹11,689 crore, beating Street estimates. The earnings before interest, taxes, depreciation, and amortisation (Ebitda) rose 9% to ₹5,034 crore. Vodafone Idea’s reported loss of ₹3,754 crore in Q1 FY27 narrowed from ₹6,608 crore in the year-ago period, but the quarter included an exceptional gain of ₹1,816 crore arising from an increase in the value of Vodafone Group’s shares. Adjusted for all exceptional items, the loss stood at ₹5,358 crore. The average revenue per user (Arpu) improved 1.7% sequentially and 7.3% year-on-year to ₹177, supported by customer upgrades and higher data usage. The management sees more room for Arpu growth; 2G to 4G migration can add ₹230-240 to Arpu, while unlimited plans can add ₹30-35.
The stock rose 2.5% on Wednesday and has more than doubled over the past year to ₹13. Still, it remains a pale shadow of its former self, which had reached a peak of ₹120 back in 2015. Adjusted gross revenue (AGR) liability overhang and weak finances led to inadequate network investments, causing subscriber losses, which further weakened cash flows. Positive subscriber additions in Q1FY27 suggest the vicious cycle is, at the very least, stabilising. Postpaid subscriber base grew, and the machine-to-machine (M2M) connections has doubled over last year. The management expects M2M traction to sustain on the back of its strong position in the connected car segment. But caveats exist. While M2M growth can help subscriber addition, it is expected to be Arpu-dilutive. Customer Arpu in Q1 was ₹195, while blended Arpu (including M2M) was ₹177. The loss of prepaid customers is also a concern.
Capex challenge
As for capital expenditure—the elephant in the room—Vodafone reiterated its ₹45,000 crore network investment plan over the next three years, with orders worth ₹9,000 crore already placed. But delayed funding can play a spoilsport. It has secured ₹6,400 crore of funding, including promoter support, while discussions continue for the balance debt raise. Funding remains the biggest swing factor for Vodafone Idea. “VIL has arrested subscriber losses and improved ARPU and churn, with focus now shifting to capex deployment and delayed debt fund raise. We tweak our FY27E/28E Ebitda by -2.6%/-0.8% as we push forward FY27 tariff hike by a quarter,” said Nuvama Research. Funding will drive the company’s ability to execute its capex plans, and narrow the network quality gap with peers. That will help retain subscriber additions, benefit from future tariff hikes, and ultimately determine whether the Q1 recovery lasts.
Bharti Airtel's India wireless Arpu stood at ₹264 and subscriber base at 680 million in Q1FY27, while the same for Reliance Jio were at ₹216 and 530 million, respectively, both dwarfing Vodafone Idea’s numbers. Also, Airtel and Jio’s cash-flow generation support their capex plans, giving them far greater financial flexibility to invest in network quality and customer acquisition. Still, Vodafone Idea has guided for double-digit revenue growth and a tripling of cash Ebitda over the next three years. “Vi’s significant valuation premium (~26.6x Sep’28 pre-IND AS EV/EBITDA), compared to its larger and more profitable peer (~10.5x for Bharti India), caps the upside from potential benefits of an acceleration in network roll-out,” notes Motilal Oswal Financial Services.