Vodafone Idea Q3 loss widens; firm loses 35 million users
The company clocked in revenue of Rs 11,764.8 crore, a 2.2% decline sequentially.
Net loss for the company, which was created following a merger of Vodafone India and Idea Cellular, widened from Rs 4950.5 crore in the fiscal third quarter ended December 31, despite a tax write back of about Rs2,000 crore.
In a statement, the company though said it has already started seeing the benefits of synergies after the merger between Vodafone India and Idea Cellular at August end, with operating expenses of Rs 8150 crore, excluding licence fees & spectrum usage charges and roaming & access charges, lower by around Rs 750 crore – annualised at around Rs3000 crore - compared with the fiscal first quarter.
“As a result, despite the reduction in revenue, EBITDA (earnings before interest, tax, depreciation & amortization) increased to Rs 11.4 billion, a 16.3% improvement on quarter,” the company said. Ebitda margins for the quarter expanded to 9.7% from 8.1% in the previous quarter.
“We are moving faster than expected on integration, specifically on the network front, and we are well on track to deliver our synergy targets,” CEO Balesh Sharma said in the statement.
The carrier’s quarterly revenue of Rs 11,764.8 crore was 2.2% lower sequentially, but the decline was limited compared with the 7.1% sequential fall in the fiscal second quarter, due mainly to the initial effects of the minimum recharge plans which forced some dormant users to become paying ones, say analysts.
“Our headline tariffs remained stable during the quarter. However, customers continue to migrate to lower ARPU plans,” the company said. However, “…we experienced growth in daily revenue on a month-on-month basis during December 2018, which continued into January 2019”, reflecting the initial effects of the minimum recharge plan.
But the plan also led to many subscribers leaving the network, thus reducing the user base to 387.2 million from 422.3 million at the end of September, a trend which is likely to continue, a person familiar with the matter said. Quarterly churn – of percentage of users leaving the network – rose to 5.1% from 4.3% in the second quarter, which also led to a 2.6% fall in the total minutes on the network during the quarter.
The increase in proportion of paying users and a lower user base though helped the telco turn around the trend of falling average revenue per user (ARPU) with the key performance parameter rising a tad to Rs89 from Rs88 in the previous quarter, offsetting the impact of some users choosing lower-valued plans.
“The initiatives taken during the quarter started showing encouraging trends by the end of the quarter,” Sharma said.
He added that the Rs25,000 crore infusion through a rights issue, of which over Rs18,000 crore will be from the two promoters, “will put us in a strong position to achieve our strategic goals”. A person familiar with the matter said that the infusion is imminent and will happen “in weeks”.
Vodafone owns a 45.2% stake in the combined entity and the Aditya Birla Group, the promoter company of Idea Cellular, has a 26% stake. The company’s net debt stood at Rs114,760 crore compared with Rs 112,510 crore at September end.
The fund infusion is critical for the company at a time its cash position is weakening. The telco’s cash & cash equivalents were Rs 8904.4 crore. It has to meet Rs9,500 crore of spectrum liabilities in 2019, besides its debt financing obligations and invest to grow its network to compete with Reliance Jio and Bharti Airtel. Interest & finance charges for the three-month period were Rs 2610 crore.
The company has been urging the government to defer the payments, but the telecom department has rejected the requests so far.
Shares of Vodafone Idea closed at Rs 29.80, down by 1.65% on the BSE on Wednesday. The results were announced after market hours.
Vodafone Idea’s results mirror the pressures on profitability and the arrest of the revenue and ARPU declines seen by the country’s second largest telco Bharti Airtel, which though managed to eke out a consolidated net profit – of Rs86 crore – helped by one-time gains, though the bottomline was 72% lower on year. New entrant Jio though reported its fifth straight profitable quarter, with a 65% on year jump in the bottom line to Rs831 crore.
"The 16.3% sequential growth in Ebitda suggests Vodafone Idea’s operating performance is showing signs of a revival, primarily as cost synergies are starting to kick in coupled with increasing month-on-month revenue growth trends," said Naveen Kulkarni, telecom analyst and head of research at Reliance Securities.
“One can expect VIL's Ebitda and revenue to improve further in the fiscal fourth quarter, with the strong momentum of healthy 4G subscriber adds likely to continue,” he added.
The company added 9.3 million 4G subscribers, taking that base up to 75.3 million at the end of December, helped by a wider 4G network.
Capex for the quarter was Rs 1170 crore, but “the level of capital expenditure is expected to be higher in Q4 as contracts with suppliers were finalised during Q3,” the company said.
Quarterly total expenses were at Rs18,226.1 crore and depreciation & amortisation charges were R. 4770 crore. The company didn’t give the previous quarter’s proforma figures.