Vodafone Idea Ltd. share price target

Despite deferment of AGR & spectrum dues, company's outlook increasingly looks uncertain. In the absence of a much needed capital infusion by the promoters, strengthening of subscriber base and substantial improvement in ARPUs is required in the coming months for the company to continue as a going concern. We downgrade our rating...

About the stock: Vodafone Idea (VIL) is India's third largest telecom operator with ~25.5 crore wireless customers in India. Reported revenues were up 2.8% QoQ to | 9,406 crore. ARPU grew ~5% QoQ to | 109, as the company had increased the entry level prepaid pricing plan from | 49 to | 79, in a phased manner, as well as increased the tariffs in some postpaid plans. The subscriber base decline was a controlled at ~2.4 million (mn) to 253 mn, with churn rate reducing to 2.9% (vs. 3.4% in...

VIL posted an in line adjusted EBITDA of INR14.1b (excluding INR1.5b one-offs on a pre-Ind AS 116 basis) v/s INR12.8b QoQ on the back of a 5% improvement in ARPU. The improvement was led by a pickup in economic activity and easing of lockdown-related restrictions, tariff improvement, and mix benefit, which offset the 2m subscriber decline. The moratorium offered by the government for AGR and deferred spectrum payment has addressed part of the repayment woes. VIL is in talks with banks to fund its upcoming repayments of: a) INR60b in NCDs...

Amidst liquidity pressures, declining subscriber base and lower ARPU, it is yet to be seen how the company will manage its debt servicing in the coming quarters. Given existing uncertainties, we remain cautious on the stock and maintain our HOLD rating with a revised target price of Rs. 7.0 based on 7.8x FY23E EV/EBITDA. Continued de-growth in subscribers and ARPU impacts topline Revenue fell 14.1% YoY to Rs. 9,152cr in Q1FY22 (-4.7% QoQ), on account of the slowdown in economic activity due to lockdown restrictions during the second wave...

Adjusted EBITDA (excluding one-offs on pre Ind AS 116) stood at INR12.8b v/s INR17.1b QoQ. This was attributed to the sharp subscriber churn due to the COVID-led lockdown and fall in ARPUs. With EBITDA (pre-Ind AS 116) of INR38.5b in 2HFY22E, it will be challenging to invest in growing its network and service upcoming repayments of: a) INR64.7b NCDs in FY22, b) INR82b deferred spectrum payment, and c) AGR installment. A capital raise or government relief package remains critical to provide immediate liquidity support to service the ballooning net debt of...

Except 4G subscriber base, all the other KPIs signal weak performance for VIL in this quarter. Despite management's committed focus to expand coverage and capacity, company's future prospects largely depend on its ability to generate higher ARPU and a near-immediate need of fund infusion to keep the operations going. Keeping a close watch on the developments, we maintain our HOLD rating on the stock with a revised TP of Rs. 9.6 based on 8x FY23E EV/EBITDA Deteriorating subscriber base and ARPU impacts topline...

VIL remains the weakest private telco. AGR dues payment extension was only a short-term breather and its survival hinges on quick capital infusion and tariff hike/floor tariff implementation. The need for capitalisation is urgent mainly due to its upcoming payment commitments, lagging spends on network and continued relative market share loss. We maintain SELL rating with a DCF based target price of | 5/share (vs. | 6/share, earlier). We...

VIL posted an adjusted EBITDA of INR17.1b (excluding an INR4.5b one-off on a pre Ind AS 116 basis), down 5% QoQ (16% miss) on continuing subscriber churn and weak ARPU. Upcoming debt repayments of INR60b in FY22 and INR82b deferred spectrum payments require an immediate liquidity support. EBITDA (pre Ind AS 116) of INR88b in FY22E makes it challenging to service its net debt of INR1,190b (excluding AGR and lease liability) and invest in its network. We maintain our Neutral rating....

Company needs to increase its ARPU substantially from current levels, a task made difficult with dwindling total active subscriber count. Longterm growth depends on pending tariff hikes and customer retention, in addition to fund infusion on a near immediate basis to continue to function as an ongoing concern. Maintaining a cautious view, we retain our HOLD rating on the stock with a rolled forward target price of Rs. 12.7 based on 6.7x FY23E EV/EBITDA. Sequential recovery seen in topline In Q3FY21, Vodafone Idea's revenues went up slightly by 1.0% QoQ to Rs. 10,894cr (1.8% YoY), primarily on account of improvements seen in 4G subscriptions. Churn rate...

Overall churn rate moderates; post-paid base loss continues Some improvement was seen across KPIs. The subscriber base declined by ~2 million (mn) to 269.8 mn (much lower than last four quarter's run rate of ~9.8 mn decline), with churn rate reducing to 2.3% (vs. 2.6% in Q2FY21), which, we believe, is due to network integration completion. The 4G sub base saw a modest addition of ~3 mn QoQ to 109.7 million, albeit better than 1.5 mn addition in Q2. The post-paid sub base at 20.8 mn, however, was down by 0.4 mn QoQ. Similarly, capex at | 970 crore (vs. ~| 1040 crore...