The quarter ended March 2020 was yet another gloomy one for Vodafone Idea Limited. The operator continued to bleed owing to the Supreme Court’s ruling on adjusted gross revenue (AGR) dues and reported losses for the seventh consecutive quarter. However, revenues registered a strong quarter-on-quarter increase of 6 per cent, driven by the prepaid tariff hike effective December 2019.

Quarterly loss widens while revenue grows

Vodafone Idea’s consolidated net loss widened from Rs 64.39 billion during the quarter ended December 2019 to Rs 116.43 billion during the quarter ended March 2020. The increase in loss can be attributed to a decline in the company’s subscriber base from 304 million to 291 million as well as burgeoning one-time charges, particularly related to statutory dues.

However, the operator’s revenue grew by 6 per cent from Rs 110.89 billion to Rs 117.54 billion, driven by its move to increase prepaid tariffs across all price points in early December 2019. The tariff hike also drove up its ARPU, from Rs 109 to Rs 121. In fact, the company reported its highest ARPU over the past seven quarters.

The EBITDA improved from Rs 34.2 billion to Rs 43.8 billion, a quarter-on-quarter increase of 28.1 per cent. This was driven by higher revenue and incremental synergy realisation. The EBITDA margin stood at 18 per cent vis-à-vis 11.6 per cent in the previous quarter.

AGR dues and OTSC take a toll on finances

During the quarter, Vodafone Idea set aside Rs 17.8 billion as exceptional expenses pertaining to AGR dues. It had a provision of Rs 528 million for AGR dues during the previous quarter.

In a separate development, on March 16, 2020, the Supreme Court dismissed a petition filed by the operator challenging the Telecom Disputes Settlement and Appellate Tribunal’s (TDSAT) order regarding the levy of a one-time spectrum charge (OTSC) for spectrum beyond 6.2 MHz. While Vodafone Idea is yet to receive any demand from the Department of Telecommunications (DoT), it has on a prudence basis set aside Rs 38.9 billion as exceptional items in line with the TDSAT order.

Integration update

The operator continued to focus on network integration and completed 92 per cent integration across the total districts, which led to significant network improvement. The integration of the Uttar Pradesh (East), Gujarat and Delhi circles was completed in January 2020 and of Uttar Pradesh (West) in March 2020, taking the total integrated circle count to 18. Further, to reduce costs, Vodafone Idea removed surplus equipment from around 64,000 sites out of the total 73,000 co-located sites, as of end March 2020. It also exited around 18,000 low-utilisation sites during this period.

While the operator’s total network integration was at the final stages of completion, the nationwide lockdown slowed down its pace and the remaining consolidation is expected to take longer than initially expected.

Thrust on network expansion

Expansion of 4G coverage and capacity remained a key focus area for the operator. It added around 21,000 4G FDD sites, its highest addition in a single quarter since the merger. Further, LTE 900 technology was rolled out in Uttar Pradesh (East) and Rajasthan during the quarter, increasing its coverage to 11 circles. At the end of the quarter, its 4G subscriber base stood at 105.6 million.

Uncertainty prevails

While Vodafone Idea was hopeful of receiving some relief in its AGR payments, the recent Supreme Court order has come as a big blow. Taking a strong stance, the apex court has asked telcos to treat DoT’s calculation as final, with no scope of re-assessment. The operator continues to be the worst hit by the AGR order and, in the recent Supreme Court Hearing it declared that it had no assets but spectrum left. It also said that it had spent whatever it had earned as cost to run telecom infrastructure and reiterated its inability to pay the AGR dues immediately. While it has recently paid Rs 10 billion towards its AGR dues, taking its total payment to Rs 78.54 billion, the repayment of the outstanding amount of Rs 510 billion seems almost unachievable if it is asked to pay immediately. Since the apex court has reserved its order on the staggered payment timeline issue, it remains to be seen whether the operator will receive some respite on this front. For now, Vodafone Idea’s future as a going concern looks cloudy.

By Kuhu Singh Abbhi