Vodafone Idea Narrows Quarterly Losses to ₹6,434 Crore as 4G Base Grows Despite Revenue Dip

Vodafone Idea, India’s third-largest telecom operator, reported a reduced loss of ₹6,434 crore for the quarter ending June 2024, compared to a loss of ₹7,674 crore in the same quarter last year. The company’s revenue dropped slightly to ₹10,508 crore from ₹10,606 crore. The telecom company added 4G subscribers for the twelfth straight quarter, increasing its 4G customer base to 126.7 million. However, the overall subscriber base dropped to 210 million from 221.4 million the previous year, with most of the remaining customers using 2G and 3G services.

Vodafone Idea’s average revenue per user (ARPU), a crucial profitability indicator, increased by 4.2% year-on-year to ₹146 but remained flat compared to the previous quarter. Notably, Airtel was the only telecom company to record an ARPU increase in the June quarter.

Debt Funding and Network Expansion

Vodafone Idea is in discussions with lenders to secure ₹35,000 crore in debt funding to expand its network. The company has already raised ₹24,500 crore in recent months through India’s largest follow-on public offer (FPO), offering equity worth ₹2,460 crore to vendors Nokia and Ericsson as payment for dues and issuing equity shares worth ₹2,080 crore to its promoter group.

CEO Akshaya Moondra stated that after the equity raise, the company is expanding its 4G coverage and capacity, with a plan to launch 5G services soon. Some capital expenditure has already been ordered and is in execution, which is expected to boost data capacity by about 15% and increase 4G coverage by 16 million people by the end of September 2024.

Focus on 4G and 5G Expansion

The capital expenditure will be focused on expanding 4G coverage in 17 priority circles, launching 5G in major cities, and increasing capacity to meet growing data demands. Moondra mentioned that the current capital expenditure needs are being met from equity funds, and they are negotiating with lenders for debt funding to support a planned capital expenditure of ₹50,000-55,000 crore over the next three years.

Vodafone Idea, along with Airtel and Jio, raised tariffs by 10-21%. While Airtel and Jio increased entry-level 5G tariffs by over 45%, Vodafone Idea benefited from the hike in 4G tariffs.

Tariff Hikes and Industry Impact

Moondra emphasized that the recent tariff hike is a positive step for the industry to improve returns on investment and cash generation for significant investments. However, further tariff adjustments are needed to fully cover the industry’s cost of capital. Experts expect the impact of the tariff hikes to become evident by the end of the current quarter and the next quarter, ending in December 2024.

Discontinuation of 3G Services

Earnings before interest, tax, depreciation, and amortization (EBITDA) for the quarter grew by 4.2% year-on-year to ₹4,204 crore, with an EBITDA margin of 40%. The capital expenditure for the quarter was ₹750 crore, the lowest among peers.

Vodafone Idea has completely phased out 3G services in seven circles, including Haryana, Kerala, Maharashtra, Gujarat, Andhra Pradesh, Mumbai, and Kolkata, where the 3G spectrum is entirely repurposed for 4G. However, the company continues to offer 3G services in some areas like Delhi and Madhya Pradesh.

Debt and Financial Obligations

As of June 2024, Vodafone Idea’s total debt from banks and financial institutions was ₹46,500 crore, with optionally convertible debentures at ₹1,600 crore. The debt from banks and financial institutions decreased by ₹4,550 crore over the past year. The company’s cash and bank balance stood at ₹18,150 crore. However, its payment obligations to the government totaled ₹2.09 trillion, including deferred spectrum payment obligations of ₹1.39 trillion and an adjusted gross revenue liability of ₹70,320 crore.