The telecom major Vodafone-Idea saw a sharp decline in the April-June operating results, though much remained in focus on Adjusted Gross Revenue Duties (AGR). This presents a considerable challenge for the company to regain competitiveness and it might require massive balance sheet repair, Kotak Institutional Equities said in a study. Vodafone Idea shares have increased by 12% at Rs 9.1 per share since Friday. But the Supreme Tribunal ‘s judgment on AGR-dues continues to be the main overhang for the stock and the company.
Net operating revenues of Voda-Idea decreased by 9.3% in the fourth quarter and by 5.4% on year basis to 10,659 crores. Also, the Average Revenue Per User (ARPU), now at Rs 114 against Rs 121 in the previous quarter, has been dropping for Vodafone Idea. In a survey, Kotak Institutional Equities reported that the number of customers and a declining user mix for the telco were affected by this coronavirus. More provision was also supported by Vodafone Idea’s net loss of Rs 25,460 crore following AGR dues.
“It would be a huge move, but only to face major challenges to cross the AGR hump. In FY2023E, Vodafone Idea looks at an incredibly difficult scenario once it has eliminated the moratorium on deferred pay-outs for spectrum, “said the study. Analysts erroneously believe Vodafone Idea would extend its ARPU. The telecommunications operator has said the industry requires ARPU from Rs 230-250 for fair profits. At the end of the subscriber base era, the figure was 279.8 Mn and the previous quarter decreased by 11.3 Mn. On a quarter-on-quarter basis, the 4 G user base dropped by 1 Mn to 104,6 Mn, and data usage increased by around 13 percent.
The ranking of Vodafone Idea was suspended by Kotak Equities as they await the AGR verdict.
In the future, Vodafone Idea will concentrate on 16 top groups, which make up 87 percent of the company’s turnover. “We feel that when competing against two solid, high-quality Indian rivals, the strategy of not investing in less-priority circles is risky. If not done well, the downward spiral for Vodafone Idea could accelerate, “said the study.
“To the degree that the Vodafone Idea continues to lose its market share, net worth is negative and even losses are being made at the PAT stage, we suggest that investors avoid the Vodafone Idea,” said Angel Broking Associate Equity Analyst Keshav Lahoti. Analysts believe that the outcome of the pending AGR dues problem will allow a decision for Vodafone ‘s survival.
