Global brokerage Nomura said impending 5G rollouts by peers could lead to accelerated market share losses for the telco. It has maintained a ‘reduce’ rating on the stock with a target price of Rs 8, signalling a potential downside risk of around 9 per cent.
Stating that fund-raising is critical for Vi, it said the telco’s 5G rollouts would remain constrained in the near term as the current cash EBITDA run-rate (Rs 84 billion) is insufficient to meaningfully increase capex, large upcoming debt repayments (Rs 70 billion) and also delays in external fund raise.
, which has maintained a target price of Rs 9, said VIL will have good cost savings from rental renegotiation with , and SUC saving (3 per cent of AGR) on the purchase of 5G spectrum. “Also, purchase of 5G spectrum ensures visibility for continued services and smooth technology transition for VIL, which was our biggest concern. However, aggressive deployment of 5G is dependent on VIL’s ability to raise more capital; while peers are gearing up for faster 5G deployment in India,” it said.
For the quarter, Vodafone Idea reported a consolidated loss of Rs 7,295 crore against Rs 7,312 crore in the corresponding quarter last year. Aided by tariff hikes, Vodafone’s Q1 revenue stood at Rs 10,410 crore, up 13.7 per cent YoY which was 1 per cent above Bloomberg consensus estimate. Vodafone Idea’s ARPU for the quarter improved 23.4 per cent YoY to Rs 128, aided by tariff hikes.
The company’s subscriber base declined to 24.04 crore compared with 24.38 crore in March quarter. Subscriber churn was marginally higher at 3.5 per cent compared with 3.4 per cent in the June quarter.
Kotak Institutional Equities said healthy ARPUs were offset by higher other expenses. It is worried over the uncertainty on the path of value creation and large potential dilution from likely conversion of AGR and spectrum dues in the coming years.
Motilal Oswal, which has maintained a neutral rating on the stock, said the significant amount of cash required to service debt leaves limited upside opportunities for equity holders, despite the high operating leverage opportunity from any source of ARPU increase. “The current low EBITDA will make it challenging to service debt without an external fund infusion. Assuming 9.8x EV/EBITDA, with a net debt Rs 1,982 billion, leaves a limited opportunity for equity shareholders,” it said.
Vodafone Idea shares have lost over 43 per cent of its value so far in the year 2022.
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