Even as Vodafone Idea Ltd reported a 11% jump in its average revenue per user (ARPU), beating street estimates, experts believe that the telco is still far away from reaching a stable ARPU base to drive the kind of revenue growth it needs to service the massive 50,000 crore adjusted gross revenue AGR dues.

The telco’s ARPU jumped to 121 in the fourth quarter ended 31 March, up 11% from the industry estimates of 113.

Vodafone Idea’s earnings before interest tax depreciation and amortization (Ebitda) grew 16% after adjusting for exceptional items, and reflected the benefits of tariff hikes said brokerages, while revenue was up 6%.

The operator reported 11,644 crore loss for the quarter due to exceptional items of 6,141 crore, mainly pertaining to license fees and spectrum charges. Overall, Vodafone Idea’s result was better than street estimates in terms of revenue, ARPU, EBIDTA and margins.

However, a 6% revenue upside with 4% subscriber loss is also a cause for concern from a market share perspective.

“Reliance Jio and Bharti Airtel’s Q4 ARPU grew by 1.7% and 14.1% QoQ respectively. Between all the three operators, Bharti Airtel gained the highest revenue market share for the quarter. However, as Airtel management also pointed out, the industry ARPU is still not good enough and a lot of it will depend on when the next wave of tariff hikes can be implemented, subject to outcome of floor pricing decision as well but currently the other two telcos are still better placed for growth than Voda-Idea,” said Keshav Lahoti, associate equity analyst, Angel Broking.

Compared to previous quarters the rate of 4G subscriber addition also slowed down in Q4 to 1.3% versus 8% and 13% in the previous quarters.

While 36% of Vodafone users account for its 4G subscribers, 40% of Airtel customers have signed up for the service. Vodafone’s pre-paid subscriber base remained flat at 92.1% showing little progress with high value subscribers.

“With continued subscriber churn, especially in the data market and weakening competitive position, revenue growth through price hike is getting diluted. Against this, Voda-Idea has incremental network investment requirements, which may turn out to be a tall task ahead,” said a report by Motilal Oswal on Wednesday.

Already, the upfront payment of 6,850 crore towards AGR dues, coupled with the cash burn in Q4, has led to a further increase in net debt. As of 31 March, net debt stood at 1.125 trillion, up from 1.033 trillion at the end of December.

At the current growth rate, analysts are still sceptic about how far the operator will be able to shore up ARPU following the economic impact of the covid-19 pandemic.

“Even if staggered payment is allowed for AGR dues, we estimate that the operator’s ARPU will need to cross 200 by FY23), for being able to service the government debt,” said a June 18th report on the telcos by IIFL securities.

The Vodafone Idea management maintained that their ability to continue as going concern is essentially dependent on a positive outcome of the application before the Supreme Court for the payment in installments and successful negotiations with lenders.

News Source: Livemint


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