Vodafone Idea (VI), the third largest wireless operator in India is “just hanging in there,” ICICI Securities said in a report on Sunday. The operator on Thursday reported its second quarter financial results for the period ended September 30, 2020 with Vodafone Idea registering Rs 107.9 billion in revenue, up 1.2% quarter-on-quarter (QoQ). Vodafone Idea also highlighted that its average revenue per user (ARPU) for its second quarter in the current financial year improved to Rs 119 as compared to Rs 114 in the previous quarter.
Vodafone Idea Lags in 4G Network, Impacted by Subscriber Base Decline
ICICI Securities in its report highlighted that the second quarter performance of Vodafone Idea “was a repeat of its continued weakness in terms of subscriber churn, lag in 4G network and balance sheet stress.”
Despite the operator registering an 1.2% growth in its revenues, ICICI Securities said that Vodafone Idea was “impacted” by decline in its subscriber base. The operator’s user base is said to have declined around eight million to 271.8 million with the churn rate increasing to 2.6% during the quarter.
“Even the post-paid sub base at 21.2 mn was down by 0.3 mn QoQ, clearly reflecting the weak competitive positioning,” ICICI Securities said in its report. “We note that ARPU growth of 4.4% QoQ, was largely owing to [the] benign base of Q1, wherein recharge unavailability and extension had led to decline.”
ICICI Securities says Vodafone Idea “Weakest” Telecom Operator
In early September, Vodafone Idea board approved a fundraising plan of up to Rs 25,000 crore through a mix of debt and equity to meet its capital needs.
“The company is in talks with several parties and expects the same in two to three months,” ICICI Securities said in its report. “Similarly, on [the] tariff correction front, without indicating [the] exact timeline, it indicated that tariff hike is likely in near term and/or floor tariff implementation will be key. We believe tariff hike is a prerequisite for fund raising.”
ICICI Securities said that Vodafone Idea is the weakest private telecom operator in India and that its its “survival hinges on quick capital infusion and tariff hike/floor tariff implementation.”
“The need for capitalisation is of paramount importance mainly due to its lagging spends on network, coverage gaps and continued churn,” ICICI Securities said in its report.