Vodafone Idea Ltd. share price target

in data volume. Capex stood at Rs9.8bn and annual capex guidance intact at Rs70bn. Vodafone are more vulnerable to lose subscribers during their merger integration. Weak Q1FY19 has led to another round of EBITDA downgrade. Current cash balance (after fund raising & tower monetization) and merger-related benefits would take care of cash burn during FY19-20E. However, net debt/EBITDA for merged entity to remain at elevated levels of ~6.7x in FY20E, restricting aggression on capex spends and retaining RMS. We are already factoring in aggressive opex savings of >Rs120bn over FY19-20E. We retain SELL with TP of Rs39, valuing at 8x FY20E pro-forma Sept'20 EBITDA....

Revenue decreased by 4.16% to Rs. 5866.7 Cr in Q1FY19 when compared to the previous quarter. Idea Cellular Ltd Q1FY19 results Comment

ARPU pressure continues due to down trading towards low tariffs and select offerings below headline tariffs too. However, the impact from RJio's postpaid plans and Jiophone is limited. Merger completion may be delayed by a month to July/August. Vodafone-Idea may not get a direct waiver, though the Bharti-Telenor deal had received Supreme Court clearance for one-time spectrum fee. There is limited overlapping between both operators' broadband (3g, 4g) network. This should support coverage expansion for the merged company

Revenue decreased by 5.91% to Rs. 6121.5 Cr in Q4FY18 when compared to the previous quarter. Idea Cellular Ltd Q4FY18 Results Comment

Consolidated revenues came in lower at | 6137.3 crore (down 5.7% QoQ) vs. our estimates of | 6212.4 crore, impacted by international IUC cuts (impact of | 52 crore) and price competition. The miss was on account of higher than expected impact of price erosion owing to competition. The resultant ARPU was at | 105 (down 7.9%QoQ) vs. our expectations of | 107. The voice volume usage continued to be buoyed by free outgoing offers under the bundled package, resulting in 16.9% QOQ growth in voice volumes to 330.3 billion minutes. The...

Idea Cellular reported better-than-expected operating performance, which was driven by one-offs of Rs4.4bn. Adjusting for one-offs, EBITDA stood at Rs10bn, in line with estimate and EBITDA margin stood at 16.4% (-238bps qoq). KPI's were weaker than Bharti Airtel in terms of total and data subscriber additions, ARPU decline. Capex stood at Rs21bn with annual capex of Rs70bn, in line with stated guidance. Competitive intensity continued to remain elevated with 1) competitors aggressively adding subscribers, 2) adding content to portfolio and spending substantially higher capex for both broadband coverage and capacity. Idea and Vodafone are struggling with...

ARPU downtrading hurts earnings; merger synergies to support in FY19 One-offs provide solace to EBITDA: Consol. revenue declined 6% QoQ to INR61.4b (2% miss), led by ARPU downtrading (-8% QoQ to INR105). However, consol. EBITDA rose 18% QoQ to INR14.5b (39% beat), driven by a decline in opex cost (incl. INR4.4b provision reversal one-offs). Excluding one-offs, EBITDA stood at INR10.1b (-18% QoQ). Net loss narrowed to INR9.6b (est. of INR15.8b), led by better-than-expected EBITDA. For FY18, revenue declined 21% YoY to INR282.8b (1% miss), while EBITDA fell 41% to INR60.5b (6% beat). Net loss...

4QFY18 is likely to be another weak quarter for Bharti and Idea. Tariff cuts in Jan-18, IUC rate cut on international incoming calls from 53p to 30p from 1st February, 2018 and ARPU down trading on account of increasing proportion of bundled plans subscribers to exert pressure on revenues of incumbents. Zee is well-poised for strong operating performance in the near term led by twin benefits of viewership gains and recovery in ad spends partly led by low base owing to demonetization. We expect Zee to report ad revenue growth of 27% YoY. Like-to-like ad revenue growth adjusted for sale of sports business to be ~20%. Subscription revenue growth is expected to be modest.

During Q3FY18, consolidated revenue declined by 13% QoQ as voice and data rates plunged 24% and 26% QoQ, respectively impacted by sharp cut in IUC and ARPU downtrading leading to fall in realization. EBITDA margin continues to remain under pressure and fell by 130bps QoQ to 18.8% due to pricing pressure and IUC cut. With the merger process expected to be completed by H1CY18, we expect synergies to start accruing from FY20E at Rs2,048 crore (nil FY19E) leading to an expansion in EBITDA margin to 28.4% in FY20E for the combined entity....

Idea Cellular (IDEA) announced that it has completed equity issuance of INR35b via the qualified institutional placement (QIP) route (@INR82.5, 10% equity dilution). This, along with capital raising of INR32.5b via preferential issue to promoters (@INR99.5, 8% equity dilution), completes IDEA's equity funding of INR67.5b (17% dilution). Total equity raising by Vodafone and Idea, along with the tower sale, will reduce the combined entity's (Vodafone + IDEA) net debt by INR295b to INR811b, thereby reducing net debt-to -EBITDA to 3.9x on FY20E, assuming combined EBITDA of INR210b (including synergy gains). Fund-raising should provide Vodafone-Idea with much-needed liquidity to ramp-up network and protect market share against deep-pocketed peers, especially in the current hyper-competitive environment