Mumbai: Telecom sector experts have raised concerns over Vodafone Idea's declining capital expenditure in absence of external funding and the operator's ability to strengthen its network to compete with rivals Jio and Bharti Airtel.
During the September quarter, the telco's capex fell 28% to ₹1,750 crore, sharply below analyst expectations of around ₹2,600 crore, and marked a steep decline from ₹2,440 crore in the previous quarter, according to reports from UBS, JPMorgan and Axis Capital.
The company's net loss narrowed to ₹5,560 crore from ₹6,610 crore in the previous quarter, primarily driven by lower interest charges. Revenue increased 2.4% year-on-year to ₹11,190 crore, while earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 3% to ₹4,690 crore with margins stable at 41.9%. According to UBS, the net loss was lower than its estimated loss of ₹6,700 crore due to lower than expected interest charges.
Operationally, Vodafone Idea showed signs of stabilisation. The company lost a million subscribers during the quarter, bringing its total to 196.7 million, the lowest quarterly loss in more than 20 quarters. Average revenue per user increased 1.2% quarter-on-quarter to ₹167. The company added about 400,000 4G subscribers to reach 127.8 million, while data consumption jumped 19% year-on-year.
Network expansion slowed alongside the capex reduction. Axis Capital said the telco's broadband tower and site additions declined significantly compared to recent quarters. The company's 4G population coverage stands at 84%, with plans to expand to 90%, while 5G service is now available in 29 cities across 17 circles.
"Lower capex can impact network quality/improvements at VI," JPMorgan said.
Analysts emphasised in their reports that the company's commentary on capital raising and regulatory relief on adjusted gross revenue (AGR) dues would be crucial for investor sentiment.
Recent Supreme Court rulings allowing reassessment of AGR dues provided some relief, as Vodafone Idea said it "welcomes the judgments" and is "in discussion with DoT (Department of Telecommunications) for next steps", according to the reports. The company's bank debt declined to ₹1,530 crore from ₹1,930 crore during the quarter, but cash reserves more than halved to ₹3,080 crore from ₹6,830 crore.
Analysts maintained cautious ratings on the company's stock. UBS held a 'neutral' rating with a ₹9.7 price target, JPMorgan kept 'neutral' at ₹7.5 and Axis Capital maintained 'reduce' at ₹6. JPMorgan said, "Key stock driver will be management comments on capital raising in light of potential government relief on past AGR dues."
During the September quarter, the telco's capex fell 28% to ₹1,750 crore, sharply below analyst expectations of around ₹2,600 crore, and marked a steep decline from ₹2,440 crore in the previous quarter, according to reports from UBS, JPMorgan and Axis Capital.
The company's net loss narrowed to ₹5,560 crore from ₹6,610 crore in the previous quarter, primarily driven by lower interest charges. Revenue increased 2.4% year-on-year to ₹11,190 crore, while earnings before interest, taxes, depreciation and amortisation (EBITDA) increased 3% to ₹4,690 crore with margins stable at 41.9%. According to UBS, the net loss was lower than its estimated loss of ₹6,700 crore due to lower than expected interest charges.
Operationally, Vodafone Idea showed signs of stabilisation. The company lost a million subscribers during the quarter, bringing its total to 196.7 million, the lowest quarterly loss in more than 20 quarters. Average revenue per user increased 1.2% quarter-on-quarter to ₹167. The company added about 400,000 4G subscribers to reach 127.8 million, while data consumption jumped 19% year-on-year.
Network expansion slowed alongside the capex reduction. Axis Capital said the telco's broadband tower and site additions declined significantly compared to recent quarters. The company's 4G population coverage stands at 84%, with plans to expand to 90%, while 5G service is now available in 29 cities across 17 circles.
"Lower capex can impact network quality/improvements at VI," JPMorgan said.
Analysts emphasised in their reports that the company's commentary on capital raising and regulatory relief on adjusted gross revenue (AGR) dues would be crucial for investor sentiment.
Recent Supreme Court rulings allowing reassessment of AGR dues provided some relief, as Vodafone Idea said it "welcomes the judgments" and is "in discussion with DoT (Department of Telecommunications) for next steps", according to the reports. The company's bank debt declined to ₹1,530 crore from ₹1,930 crore during the quarter, but cash reserves more than halved to ₹3,080 crore from ₹6,830 crore.
Analysts maintained cautious ratings on the company's stock. UBS held a 'neutral' rating with a ₹9.7 price target, JPMorgan kept 'neutral' at ₹7.5 and Axis Capital maintained 'reduce' at ₹6. JPMorgan said, "Key stock driver will be management comments on capital raising in light of potential government relief on past AGR dues."
