When Vodafone Idea raised Rs 18,000 crore through a follow-on share sale in April this year, it was a much-needed energy boost for the ailing telecom joint venture between Vodafone and the Aditya Birla Group. However, the company is not out of the woods yet.
The telecom company's plans to raise debt of around Rs 25,000 crore are yet to be concluded. This is crucial for it to increase its network and infrastructure investments over a sustained period, which will help it start regaining subscribers and boost earnings.
So far this year, including the follow-on offer and a preferential share issue to promoters and equipment suppliers, the company has raised around Rs 24,000 crore in equity, which has helped it start the much-needed network upgradation and expansion of 4G. In September, it signed a USD 3.6 billion deal with Nokia, Ericsson and Samsung for network equipment over three years.
Vodafone Idea (Vi) has increased its 4G data capacity by 14 per cent and 4G population coverage by 22 million, reaching 1.05 billion at the end of September 2024, compared with 1.03 billion in March. It has plans to launch 5G this financial year too.
But, with rivals Reliance Jio and Bharti Airtel significantly ahead here, Vi continues to lose subscribers. Its total subscriber base has declined to 205 million at the end of September from 219.8 million a year ago. The company reported a net loss of Rs 7,176 crore in the September quarter, up from Rs 6,432 crore in April-June but lower than the Rs 8,738 crore loss in the year-ago quarter.
Notably, Vi also saw a drop in 4G subscribers in the quarter gone by, reversing the upward trend it had seen in previous quarters. In the second quarter, it had 125.9 million 4G subscribers, down from 126.7 million in the first quarter. One reason for Vi and others losing some subscribers last quarter was the price hikes. Some subscribers switched to BSNL in the aftermath of the hikes, but that trend seems to be reversing.
Additional fundraising will then become crucial for Vi to make investments in its network and arrest its slide in subscribers in the coming years. Talks have been ongoing but are yet to be concluded, with lenders reportedly seeking more clarity on the AGR (adjusted gross revenue) front after the Supreme Court dismissed the curative petitions filed by telecom operators, including Vi, in September.
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In a post-earnings call, Vi CEO Akshaya Moondra said the reduction in AGR liability was not part of the business plan submitted to banks. But, he thought that, like any interested party, the lenders were looking at what was happening on the AGR front.
The company has planned capital expenditure of Rs 8,000 crore in the second half of this financial year. Its cash and bank balance, as of September 30, stood at Rs 13,620 crore. Its debt from financial institutions stood at Rs 3,250 crore, while payment obligations to the government were at Rs 2.12 lakh crore.
The telecom company has been engaging with the government on the AGR matter since the Supreme Court rejected the petitions. It has also been in negotiations with the government in relation to doing away with bank guarantees. In the earlier call with analysts back in September, Moondra had hoped to close the bank funding in seven to eight weeks.
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Hemang Khanna, research analyst at Nomura, expects VI's pace of subscriber loss to decline in the 2025-26 financial year and the company to return to a "modest growth path" in 2026-27, underpinned by investments for expanding 4G coverage and 5G rollout. However, additional fundraising will be key.
"The outlook for Vi remains hinged on Vi closing its debt raise soon, which is critically essential for Vi to be able to invest in networks and potentially return to a modest subscriber growth path," said Khanna.
The adverse Supreme Court ruling, continued decline in subscribers and the broader market sell-off have all weighed on Vi's shares in the last few months.
Vi hit a 52-week low of Rs 7.32 on the BSE on Thursday, eventually closing at Rs 7.34 on Thursday, 0.4 per cent lower than the previous close. Since hitting a 52-week high of Rs 19.15 on June 28, 2024, the stock has corrected over 61 per cent.