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Vodafone Idea continues to be on lookout for investors as revenues, profits sag

In its earnings call, the telco discussed issues related to subscriber decline, fundraising, liabilities, and a review petition filed by Vi in the AGR dues case before the Supreme Court of India. 

Key Highlights

  • “On fund raising, the company is currently in active discussion with potential investors,” Vodafone Idea said in its press release for earnings this quarter, indicating it still doesn’t have concrete pathways to funding to pull it back from financial precarity.
  • Data usage among 4G users stood at 14.6GB per user per month in the Q1FY22 quarter, compared to 12.8GB per month in the previous quarter.
  • Strapped for cash, the telco is seeking to achieve annualised savings of Rs 4,000 crore in cost-saving measures.
  • Revenue dipped 4.7% QoQ to Rs 9,150 crore, with the company blaming the COVID-19 lockdown and restrictions thereof. Net loss widened to Rs 7,319 crore.

Vodafone Idea continues to post dismal numbers as it faces an existential risk. Rumours swirled after the company released its results that it had defaulted on license fee dues; a spokesperson denied this, saying that the fees had been paid. The company’s precarious financial situation has led even competitor Airtel to worry about the telecom market’s competitiveness, and led to the three private players to jointly ask the government for financial relief. Without a significant change in the market, whether it is tax relief or investment in the troubled telco, the market may be at the brink of becoming a two-player industry.

Notes from earnings call

  • Subscriber decline due to lockdown: Vi managing director and CEO Ravinder Takkar said in response to a question on subscriber decline that most of the reduction was due to the pandemic and the second wave. “This is certainly a huge impact of the COVID second wave, as you would recall for the earlier quarters, we had reached a point of continued reduction when the subscriber losses to record that we had almost reached to a totally flat situation in Q4 of last year. So the second wave basically resulted in lots and lots of closures and lockdown,” Takkar said. Takkar said the subscriber base was stable, and “we only saw a decline of one million 4G subscribers,” and that usage was up during the lockdown.
  • Giving back spectrum: An analyst asked if Vi would be willing to return spectrum to the government in exchange for waived off liabilities. “We would not like to comment on media speculation. We believe we have the adequate spectrum for our customer base, for the plans we have going forward; there was a recent spectrum auction where we optimized our holdings even further. Talking about spectrum returning, which doesn’t exist as a policy yet, is just really media speculation,” CFO Akshaya Moondra said.
  • Still in the middle of fundraising: “We are still in the middle of fundraising and our fundraising process continues. Any additional coverage improvement [in coverage of the network] will only take place after the funds from this fundraise are declared to capital expenditure,” Moondra said.
  • Review of AGR judgment: The Supreme Court in July rejected a plea by Vi and Airtel to correct what the telco described as mistakes in a judgment on AGR dues pronounced by the court. Vi filed a review petition in the case, and Takkar said that while it is “clearly difficult to comment on exactly how the court will take it, our contention is really that in the amount that has been written up in the judgment, there are errors and mistakes. Manifest errors, mistakes, calculation errors that are there which need to be fixed. It’s not necessarily pointing the finger at somebody to say they made a mistake. It is a lot of data for many, many years for many circles, for many companies, and it is very possible and feasible that these errors could take place over the years in which these calculations are done.”

Quotes are slightly edited for clarity.

Unaudited Results | Quarterly Report | Press Release

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