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Vodafone Idea quarterly net loss widens to USD1.5bn

1 Jul 2020

Indian cellco Vodafone Idea has booked a consolidated net loss of INR116.3 billion (USD1.5 billion) for the three months ended 31 March 2020, widening from a loss of INR64.5 billion in the preceding quarter. Gross revenue improved by 6.0% quarter-on-quarter to INR117.5 billion, whilst EBITDA grew to INR43.8 billion from the INR34.2 billion. These improvements were wiped out by the company’s exceptional item expenses, however, which totalled more than INR60.7 billion. These included impairments related to a one-time spectrum charge (OTSC) demand of INR38.9 billion from the Department of Telecommunications (DoT) and the net impact of the ongoing Adjusted Gross Revenue (AGR) case in the Supreme Court (INR17.8 billion recognised during the quarter). The decade-long case relates to the calculation of AGR, upon which operators’ licence and spectrum fees are calculated. Vodafone Idea has recognised liabilities totalling INR460 billion – although the DoT puts the figure at around INR583 billion – in fees, interest, penalties and interest on the penalties, of which the operator paid INR68.5 billion in three instalments during the quarter. The company is in a poor position to pay the demanded fees, however, and has warned that it will be forced to close down operations if the court or the government are unable to provide some form of relief. The apex court is currently considering a proposal to allow the providers impacted by its October 2019 ruling on AGR a much longer timeframe within which to pay the demanded dues. Commentators have noted though that a longer timeframe might simply drag out Vodafone Idea’s demise as the long-term burden of the payments would limit its capacity to invest or innovate and could undermine its potential to compete with providers with deeper pockets. At the end of March 2020, Vodafone Idea’s net debt stood at INR1.13 trillion, and its annual net loss for the year to end-March was INR738.8 billion – the highest ever recorded by an Indian company according to the Hindustan Times.

Vodafone Idea counted a total of 291.1 million mobile subscribers as at 31 March 2020, down from 334.1 million a year earlier and 304.1 million at end-December 2019. Tariff price increases helped bolster ARPU to INR121 from INR109 in December 2019 and INR104 in March 2019, but 4G subscriber growth slowed sharply with the cellco adding just 1.4 million net new users compared to 8.3 million in the preceding quarter (earlier periods were not comparable due to a change in the company’s reporting standards).

On a more positive note, though, the company has completed the integration of its former Vodafone India and Idea Cellular networks in 92% of districts nationwide. The integration process was completed in the Uttar Pradesh East, Gujarat and Delhi circles in January 2020 whilst work in the Uttar Pradesh West circle was finalised in March. Integration is ongoing in just four circles, Maharashtra, Mumbai, Kerala and Tamil Nadu.

India, Vi (Vodafone Idea Limited, VIL)

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