The quarter ended December 2019 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 sixth consecutive quarter. However, revenues registered a marginal increase on the back of ARPU improvement.

Quarterly loss narrows and revenue grows

Vodafone Idea’s consolidated net loss decreased from Rs 509.22 billion during the quarter ended September 2019 to Rs 64.39 billion during the quarter ended December 2019. Further, the operator’s revenue grew by 2.3 per cent from Rs 108.44 billion to Rs 110.89 billion, led by significant 4G additions driving ARPU improvement. The ARPU increased from Rs 107 to Rs 109 supported by improved customer mix. In fact, the company reported the highest ARPU over the past six quarters. While the operator undertook a key move to raise tariffs by about 30 per cent in December 2019, the tariff increase had a limited impact on this quarter’s revenue.

The earnings before interest, taxes, depreciation and amortisation (EBITDA) increased from Rs 33.96 billion to Rs 34.2 billion, a quarter-on-quarter increase of 0.7 per cent. This was on account of higher revenue and incremental synergy realisation, which was partially offset by the increase in interconnect cost. The EBITDA margin stood at 11.6 per cent vis-a-vis 10.2 per cent in the previous quarter.

AGR blues continue

During this quarter, the company set aside Rs 528 million as exceptional expenses pertaining to AGR dues. It had made provisions worth Rs 441.5 billion for pending AGR dues during the previous quarter. The operator’s gross debt (excluding lease liabilities) stood at Rs 1,158.5 billion as of December 31, 2019, while its net debt stood at Rs 1,033.1 billion.

Overall subscriber base declines while 4G subscribers increase

The operator’s overall subscriber base declined from 311 million to 304 million on a quarter-on-quarter basis, making the operator slip to the third spot in terms of subscriber base behind Reliance Jio and Bharti Airtel. However, subscriber churn on the operator’s network reduced to 3.3 per cent as compared to 3.5 per cent in the previous quarter. Meanwhile, 4G net additions accelerated to 8.3 million, taking the overall 4G subscriber base (including VoLTE users) to 104.2 million subscribers. The operator attributed this growth to improved customer experience. The total data volume grew by 8.5 per cent over the previous quarter to stand at 3,790 billion MBs.

Thrust on network expansion

During the quarter, the expansion of 4G coverage and capacity in key markets remained an essential focus area for the operator. It deployed close to 58,200 time division duplex (TDD) sites to augment data capacity. Further, LTE 900 technology was rolled out in Uttar Pradesh (West) during the quarter ended December 2019, increasing its coverage to nine circles. In addition, the operator’s massive MIMO roll-out remained the largest in India.

Merger metrics

Vodafone Idea continued to focus on rapid network integration and achieved 85 per cent synergies from the Vodafone-Idea merger. A total of 86 per cent districts were consolidated during the quarter, resulting in a significant improvement in network speeds and customer experience. Further, the operator removed surplus equipment from around 58,000 sites as against the total 73,000 co-located sites by end-December 2019, leading to a reduction in costs. It also exited close to 17,000 low utilisation sites. However, the company is slated to miss the earlier stated deadline of March 31, 2020 for network integration across the country, and is expecting the integration to be completed by the first quarter of the next fiscal.

What lies ahead?

In view of the Supreme Court’s recent order directing contempt proceedings against telcos that have violated its AGR ruling, continuing as a going concern looks tough for the operator. The order has dealt a big blow to the operator. While the company was hopeful of receiving some respite through extension of AGR payment timelines, the Supreme Court ruling has done quite the opposite. The operator had to immediately pay Rs 25 billion to the government and has recently paid another tranche worth Rs 10 billion. However,  in sum, it owes over Rs 500 billion, repayment of which seems quite difficult.

By Kuhu Singh Abbhi