Vodafone Idea Q4 preview: Losses mount, AGR burden clouds outlook
NEW DELHI
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Vodafone Idea Ltd is set to report a loss for another quarter amid mounting financial pressure and fresh concerns over its survival owing to pending adjusted gross revenue (AGR) dues.
The telecom operator, which will declare March quarter earnings on 30 May, is expected to report a net loss of ₹7,162.5 crore—an average of six brokerage firms' estimates—slightly narrower year-on-year but widening sequentially. Its loss stood at ₹6,609 crore in the preceding quarter and ₹7,675 crore in the year-ago period.
Revenue is projected to come in at ₹11,030 crore, reflecting a 4% improvement from the year-ago period but down marginally from ₹11,117 crore in the preceding quarter.
Better network, slower subscriber churn
A sequential widening of losses is expected due to higher operating costs from expanding the network footprint. Besides, weaker revenue growth owing to continuous subscriber loss is also expected to weigh on Vodafone Idea's financials.
Also Read: Sword of Damocles hangs over Vodafone Idea's bank guarantees
A weak top line and higher expenses are also expected to affect the company's earnings before interest, taxes, depreciation and amortisation (Ebitda). 'We expect Ebitda to decline 5.2% on-quarter/ +3.1% on-year to ₹4,470 crore on a dip in revenue, and operating cost is likely to rise from expansion in network footprint," said analysts at ICICI Securities in a note dated 5 April.
Vodafone Idea has been improving its 4G services and has also started rolling out 5G, with Mumbai, Chandigarh, and Patna being the first circles. On 15 May, the company launched 5G in Delhi and said it was targeting to expand the services in all 17 circles by August 2025.
Analysts expect the company to spend the guided ₹8,000 crore capex in the second half of 2024-25, implying a sharp increase in capex in the March quarter.
Even though the company has been losing subscribers for some time, analysts said an improvement in the network could slow its subscriber churn. Compared to the loss of 5 million subscribers each in the September and December quarters, the company's subscriber churn is expected to slow down to around 2.5 million in the March quarter, according to analysts' estimates.
This is because of network improvement starting November 2024 and an increase in the company's 4G subscribers. The company is experiencing churn among the lower-end revenue users. As of December end, Vodafone Idea had 200 million mobile subscribers.
'We believe that Vodafone Idea is still some point away from showing positive net adds. We expect Q4 Arpu (average revenue per user) to be largely flat on-quarter," said analysts at BofA Securities in a 7 April note.
Also Read: Two months after second lifeline, Vodafone Idea again raises survival fears
An average of six brokerage firms' estimates shows that Vodafone Idea's Arpu is expected to increase marginally to ₹164 from ₹163 in the previous quarter. A largely flat Arpu can be attributed to two fewer days during the March quarter, which offset the benefit of the company's improved subscriber mix. Further, the July 2024 tariff hike has completely passed through the company's Arpu by end-Q3FY25, analysts at JM Financial said in a 4 April note.
AGR spectre
When the company reports its earnings on Friday, investors will closely look for its commentary on the AGR dues, any clarity from the government on possible relief, fundraising prospects, the company's sustainability post 2025-26, and future tariff hikes.
In a 27 May exchange filing, Vodafone Idea said it would also consider and evaluate any and all proposals for raising funds in one or more tranches, either by way of a rights issue or further public offer or private placement (including preferential allotment or qualified institutions placement) or through any other permissible mode, in its board meet on Friday.
On 17 April, Vodafone Idea submitted a representation to the government, seeking a waiver of interest, penalty, and interest on penalty on its AGR dues. The telco said the AGR liability demand from the government stands at ₹83,400 crore as of March end, with an annual instalment of approximately ₹18,000 crore due starting 31 March 2026 for the next six years. In comparison, Vodafone Idea generated ₹8,400-9,200 crore cash annually in the last three years.
In a court petition, it said it would not be able to operate beyond the current fiscal year without bank funding, which remains elusive as lenders remain wary of its dues linked to AGR. The Supreme Court, however, dismissed the plea on 19 May.
Also Read: No plan to merge Vodafone Idea and BSNL: Scindia
Vodafone Idea has been trying to raise bank funding of ₹25,000 crore for quite some time now. However, banks want the AGR matter resolved before processing further loans. 'The government may have to extend the moratorium or increase its stake in the telco," said analysts at IIFL Capital in a 20 May note.
In March, the government offered another reprieve to the company by converting an additional ₹36,950 crore worth of statutory dues into equity. The second dues conversion took the government's stake in Vodafone Idea to 49%.
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