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In spite of tariff hikes, Vodafone Idea’s net worth and cash gravitate towards zero

MUMBAI: A calendar year is a lengthy time in the existence of India’s telcos. In March 2019, Vodafone Plan Ltd was the market chief by a vast margin in conditions of selection of subscribers. It experienced a net worth of about Rs60000 crore, and was about to augment its Rs7550 crore cash balance with a Rs25000 crore rights issue.

Of class, anyone knew that it was a enterprise in decrease, but rarely anybody could forecast the immediate tempo of decline.
In March, Vodafone Idea has fallen at the rear of each Reliance Jio Infocomm Ltd and Bharti Airtel Ltd in phrases of subscribers. Far more importantly, its net worth has basically evaporated and now stands at only Rs6000 crore. Cash and cash equivalents are a lot less than Rs2500 crore.

Primarily based on the cash burn and the web losses in Q4, even altered for exceptionals, it appears to be like like the company’s net worth would have thoroughly wiped out by end-June. Of program, the cash would have disappeared, much too, necessitating refinancing to run operations.

All of this is regardless of the significant tariff hikes in December, which served the company report a 6% sequential enhance in revenues in Q4. Regular revenue per user (Arpu) rose 11%, considerably improved than the mere 2% enlargement at Reliance Jio Infocomm Ltd, and close to the 14% improve claimed by Bharti Airtel Ltd.
Maybe for the very first time, Vodafone Strategy matched Reliance Jio’s sequential revenue development, even though of study course this is a pyrrhic victory.

Earnings just before interest tax depreciation and amortization (Ebitda) grew 16% right after adjusting for exceptional items, and mirrored the gains of tariff hikes. But the great news finishes there.
The company’s cash constraints and the resultant delay in investments in its community are adversely impacting subscriber figures. The firm continues to get rid of subscribers, with the subscriber base at the finish of the March quarter staying 4% lower from December. 4G subs additions ended up just 10% of Bharti’s amounts. And for the initially time, it documented a drop in broadband subscribers of 1 million.

Its restrictions on the network front are captured by the 7.9% progress in total info visitors previous quarter. Comparatively, knowledge targeted traffic on Airtel’s community grew by about 16%. Capital expenditure for the duration of the quarter dropped 45%, partly impacted by covid-19 disruptions to devices supply and nationwide lockdown.
In any scenario, Vodafone Idea’s capability to massively scale-up capex continues to be constrained. If the low cash balance wasn’t bad more than enough, the Supreme Courtroom has been demanding a realistic upfront payment before settling for a staggered payment mechanism for modified gross revenue (AGR) dues.
Presently, the upfront payment of Rs6850 crore in the direction of AGR dues, coupled with the cash burn up in Q4, has led to a further maximize in net personal debt. In conclusion March, internet personal debt stood at Rs1.125 trillion, up from Rs1.033 trillion in conclude December. In the meantime, annualised Ebitda employing Q4 figures consequence in an unwieldy net personal debt to Ebitda ratio of 16 instances.
Vodafone Idea’s long run has hung in the balance for some time now. Although significantly is dependent on the ultimate verdict from the Supreme Courtroom on the repayment schedule of AGR dues, it goes without the need of expressing that the enterprise also requirements a quick equity infusion to stay alive.

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