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Vodafone Idea Q1 loss widens to ​Rs 4,908 crore QoQ; margins expand

​Revenue for the quarter ended June 30 came in at Rs 11,269.9 crore, down 4.3% on quarter.

ET Bureau|
Updated: Jul 26, 2019, 07.42 PM IST
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MUMBAI: Vodafone Idea’s (VIL) net loss narrowed to Rs 4,873.9 crore for the April-June quarter, helped by a change in accounting standard and lower operating costs, but its revenue fell dropped below rival Reliance Jio’s for the first time, as some subscribers left and others moved to lower tariff plans.

The adoption the Ind AS 116 accounting standard “resulted in a positive impact of Rs. 1.2 billion at PAT (profit after tax) for the quarter,” the company said in a statement on Friday.

Essentially, Ind-AS 116 enables companies to recognise leases (towers in this case) as assets in the balance sheet from April 1, 2019, and as such, the relevant lease rentals do not get reflected in the network opex – thus pushing up earnings before interest, tax, depreciation & amortization (Ebitda), but as an element of depreciation cost.

Thus, quarterly Ebitda more than doubled to Rs 3650 crore from Rs 1790 crore, with the adoption of the new accounting standard pushing up the metric by Rs2,410 crore. Operating expenses fell nearly 24% to Rs7619.9 crore, while depreciation & amortization, and finance costs rose over 31% and 23.4%, respectively. Net debt however fell sequentially to Rs99,260 crore from Rs11,839 crore.

EBitda margin expanded to 32.5% from 15.2% in the previous quarter.

Revenue for the quarter ended June fell 4.3% on quarter to Rs11,269.9 crore, hurt by subscribers leaving due to the company’s minimum recharge plans and “continued down trading of high ARPU (average revenue per user) customers,” the company said. Rival Jio’s revenue for the same period was Rs 11,679 crore, while net profit rose 46% to Rs891 crore, with its subscriber base at over 331 million. Airtel’s results are expected on Aug. 1.

The company said that the impact of lower revenues was partially offset by further cost savings due to continued synergies derived from the integration of Vodafone India and Idea Cellular’s networks and operations, with the combined entity having reached around 70% of its opex synergy target of Rs 8,400 crore.

“We are delivering on our stated strategy although the benefits are not yet visible in our top line,” Vodafone Idea CEO Balesh Sharma said. “We are well on track to deliver our synergy targets by Q1FY21. We expect these factors to increasingly contribute to our financial performance going forward.”

The telco, which raised Rs25,000 crore via a rights issue, plans to sell its stake in the Bharti Infratel-Indus Towers merged entity, with the deal expected to close in August. “We are also exploring options to monetize over 159,000 Kilometers of intra-city and inter-city fibre which will provide further financial flexibility,” Vodafone Idea said.

Shares of Vodafone Idea closed at Rs 9.25, down by 4.84%, on the BSE on Friday. The results were declared post market hours.

"…the sharp increase in the company's Ebitda is artificial as it's not driven by business growth but a change in the accounting standard (Ind AS-116) that allows tower leases to no longer be treated as opex under IFRS 16, but instead as a lighter depreciation & amortisation item," Rohan Dhamija, partner & head of India & Middle East, Analysys Mason, said, who added that the net loss was wider than expected.

While the minimum recharge plans - under which users must recharge every 28 days – meant subscriber base fell to 320 million from 334.1 million, it helped ARPU grow for the second successive quarter – to Rs108 from Rs104 in the previous quarter.

“…the customer base on ‘service validity vouchers’ is yet to stabilize on a regular recharge cycle,” the company said.

The company said its high revenue customers were ‘broadly stable’, reflecting in the churn which dropped to 3.7% in the June end quarter, compared to 7.2% in the previous one.

The closure of Vodafone M-Pesa and Aditya Birla Idea Payments Bank Ltd (ABIPBL) resulted in an impairment loss of Rs 210 crore during the quarter, dragging its net loss further.

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