Report card: Vodafone Idea trims loss; Arpu improves in Q2

Vodafone Idea (VIL) on Friday reported narrowing of its net loss to Rs 7,132 crore in the July-September quarter, almost in line with Bloomberg consensus estimate of Rs 7,100 crore, aided by lower interest and depreciation. The company had reported a net loss of Rs 7,319 crore in the preceding quarter.

The company’s revenues increased marginally by 2.8% quarter-on-quarter to Rs 9,406 crore, aided by the pick-up in economic activities and easing of lockdown restrictions induced by the severe second wave of Covid-19 that impacted the first quarter. Here, the company beat the estimate of Rs 9,321 crore.

The Ebitda (earnings before interest, tax, depreciation and amortisation) during the quarter improved to Rs 3,863 crore, up 4.2% sequentially, while the margins increased 60 basis points q-o-q to 41.1%, aided by improvement in revenue which was partially offset by increase in customer acquisition costs due to higher gross additions during the quarter and other inflationary cost increases, company said in a statement.

Though the company’s numbers have improved on the back of increased average revenue per user (Arpu), a turnaround hinges on its ability to raise funds now that the government has provided it a cash flow relief by offering a four-year moratorium on payment adjusted gross revenue (AGR) and spectrum dues.

In the notes to profit and loss account, the auditors of the company have noted that VIL’s ability to continue as a going concern is dependent on raising funds as required, successful negotiations with lenders for continued support and generation of cash flow from operations that it needs to settle its liabilities as they fall due.

The company has incurred a loss of Rs 14,451 crore for the half year ended September 30, and its net worth stands at a negative Rs 52,685 crore. The total debt of the group stands at Rs 1.9 lakh crore as on September 30, while an amount of Rs 10,022 crore has been classified from non-current borrowings to current maturities of long-term debt for not meeting certain covenant clauses under the financial agreements.

“Further, as a result of earlier rating downgrade, certain lenders had asked for increase of interest rates and additional margin money/security against existing facilities…as of date the group has met all its obligations. Pending the outcome of the above matters, these consolidated financial statements have been prepared on a going concern basis,” the auditors note read.

According to analysts at ICICI Securities, “The company needs to raise capital as early as possible to stay competitive. The potential delay in tariff hike is making things tougher for the company”.

On operating metrics, VIL’s Arpu improved 5.3% q-o-q to Rs 109 with certain pricing initiatives taken during the quarter. The company increased the entry level prepaid pricing plan from Rs 49 to Rs 79, in a phased manner, as well as increased the tariffs in some postpaid plans. However, its Arpu continues to trend the lowest in the industry.

The company’s subscriber base stood at 253 million versus 255.4 million in the June quarter, registering a decline of 2.4 million. However, the 4G subscriber base saw a healthy addition of 3.3 million, with overall 4G base now at 116.2 million. Subscriber churn also improved to 2.9% in the quarter ended September 30 against 3.5% in the previous quarter.

With Q1FY22 witnessing significantly higher data usage during the lockdown, the sequential data volume growth remained moderate at 0.4%. On a year-on-year basis, data volumes witnessed strong growth of 27.1%. Data usage per 4G subscriber is now at 14,809 MB against 15,081 MB in Q1FY22.

Ravinder Takkar, MD & CEO, Vodafone Idea, said “We welcome the government’s landmark reform package which addresses several industry concerns and provides immediate relief to the financial stress in the sector. We also appreciate the government’s recognition of the telecom sector’s contribution in keeping the country connected during the pandemic. During the last quarter, we witnessed a recovery in our operating momentum as the economy has started to gradually open up aided by the ongoing rapid vaccination drive. We continue to improve our 4G subscriber base on the back of superior data and voice experience on Vi GIGAnet.”