Focus is on Vodafone Idea Ltd (VIL) shares on Tuesday morning after the telecom operator’s investor call to go over significant developments. Since the capex deployment is anticipated to start in the December quarter, the telecom operator anticipates a decrease in customer turnover starting in the March quarter. It projects a 20% price increase in the next year and anticipates the completion of a debt fundraising effort of Rs 35,000 crore in 7-8 weeks.
According to MOFSL, which was present at the meeting, the management anticipates another 20% tariff rise between Q2FY26 and Q3FY26, which is comparable to the rate hike that was seen in July. The management of Vodafone Idea believes that when the moratorium expires, the equity conversion will start.
“The business and Nokia, Ericsson, and Samsung have finalized an agreement to sell network equipment worth at Rs 30,000 crore. It is anticipated that the radio equipment supply and deployment will take place in the second part of the next quarter (November/December 2024).
One of the most important aspects of its capital expenditures (capex) deployment is its radio equipment, which involves launching 5G and extending the reach of 4G. This is a component of a three-year capital expenditure plan valued at Rs 50,000–55,000 crore, of which the remaining Rs 20,000–25,000 crore would go into fiber and core, according to MOFSL.
The domestic brokerage anticipates that subscriber metrics will improve starting in the March quarter and that the long-awaited capex deployment will begin in the December quarter. The business plans to build 2,15,000–2,20,000 sites, up from the current number of 1,70,000 sites, in order to boost 4G coverage.
The State Bank of India (SBI) has received an assessment report from Vodafone Idea, enabling banks to go on with internal procedures. Vodafone Idea is now in the advanced stages of talks to obtain loans of Rs 35,000 crore. It is anticipated that funding would end in 7-8 weeks.
Regarding the SC AGR setback, Vodafone Idea is consulting with top government officials to explore remedies, even if the court’s decision to reject the curative plea was the final one. It is now compiling a thorough analysis of the computation mistake and will speak with the government about those demands once again in the next several days.
According to MOFSL, the management said that the long-term business strategy was created without taking into account any possible advantages in the relevant field.
Due in large part to the transition to 4G, more data monetisation, and higher minimum recharge vouchers, VIL’s ARPU has continued to climb. But throughout this time, there has been a high subscriber attrition.
“Limited network investments have caused subscriber attrition by impeding the consumer experience. The business plans to spend between Rs 50,000 and Rs 55,000 crore over the next three years in order to launch 5G, increase capacity, and spread 4G coverage—all of which are very important. Nevertheless, it still owes Rs 2 lakh crore, with an annual payment of Rs 43,000 crore starting in FY26. In comparison to the 1QFY25 annualized EBITDA (IND-AS 116) of Rs 8,000 crore, this seems difficult, according to MOFSL.
Despite the high operating leverage opportunity from any source of ARPU improvement, the sizeable amount of cash needed to service debt leaves limited upside opportunities for equity holders, it said, adding that the conversion of unpaid installments post-moratorium into equity may start by FY26/FY27.
“Over FY24–26E, we are accounting for a revenue/Ebitda CAGR of 11%/31%. With net debt and an assumed 14 times EV/Ebitda, we arrive at Rs 12 as our target price. Limitations on subscriber attrition may continue to be a major driver of the stock. We maintain our Neutral rating for the shares, according to MOFSL.
