Vodafone Idea may be strapped for cash, but it’s fighting hard

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The shareholders of Vodafone Idea Ltd (Vi) are interesting. The company’s losses and debt are higher than ever, but its shares are trading over 40% higher than pre-covid highs.

While they somehow maintain the hope of a response from the company despite the obstacles, Vodafone Idea, on the other hand, is doing its best with its meager resources.

Its gross subscriber additions of 22 million hit a multi-quarter high. And while it continues to lose subscribers, net subscriber losses have been contained at 2 million in the past two quarters, down from 8 million, 11 million and 13 million in the previous three quarters.

Additionally, in the premium 4G segment, the company added 4 million subscribers in each of the last two quarters. It also gained market share in data traffic in the March quarter, with its total traffic growth exceeding that of Reliance Jio, according to data collected by Jefferies India Pvt. Ltd.

Vodafone Idea clearly exceeds its weight. It is weighed down by extremely high debt and its liquidity is almost entirely depleted. But it has succeeded in increasing the number of subscribers in the key segment of 4G and driving the growth of data traffic.

Of course, it continues to lose market share in terms of subscribers and revenue as its competition grows at a faster rate. Goldman Sachs analysts point out that the company lost an additional 130 basis points (bps) of revenue market share in the March quarter, bringing its cumulative share loss to 630 bps in the past 12 months. A basis point is one hundredth of a percentage point.

And thanks to the regulator’s decision to remove the interconnection user charge (IUC), the company’s revenue fell 12% sequentially, resulting in higher losses than usual. The telecommunications provider’s net loss in the March quarter rose to Rs 6,985 crore, from 4,540 crore in the previous quarter. On a comparable basis, total revenue and average revenue per user remained stable, analysts said.

Of course, for all of its exploits, the fact remains that Vodafone Idea sees a bleak future.

Management of the company said there is significant uncertainty about its ability to continue as a going concern, which depends on its ability to raise additional funds, refinance debt and monetize certain assets. It should be noted that the board of directors of the company in September 2020 had approved a fundraising of a value 25,000 crore through a mix of debt and equity instruments. But there is no concrete news on this, and the company continues to be in discussions with potential investors.

The company further added that its ability to remain in business also depends on “the outcome of the change request filed with the Supreme Court (SC) and the clarity of the amount of the next installment and the acceptance of its request. of postponement by the DoT “. a plea filed in the SC to reduce its adjusted gross income (AGR) contributions by more 58,000 crore demanded by the telecommunications department. He also wrote to the DoT for the postponement of a payment of 8,211 crores payable in April 2022.

Analysts say the company is heading for a financial crisis when annual payments fall due. And the current cash balance is simply 350 crores. The company’s ratings have been lowered, as a result of which some lenders have demanded higher interest rates and additional security against existing facilities, analysts from Motilal Oswal Financial Services said in a note to clients.

At the same time, with Vi’s capital expenditure remaining lower than that of its competitors, market share losses are expected to continue. In FY21, Vodafone’s capital expenditure was 72% lower than its competitor Bharti Airtel Ltd.

Vodafone Idea’s response may sound impressive, but what really matters is that potential investors are impressed and are ready to support it.

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