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Clarity on future fundraise is needed for Vodafone Idea: Analysts



In March, its promoters infused additional equity into the cash-strapped telecom company of around ₹4,500 cr

Despite Vodafone Idea seeing a narrowing of losses in their Q4 FY22 results, the company is not out of the woods according to analysts. Clarity on future fundraising is still needed, as well as future tariff hikes on post paid plans. 

As per the Motilal Oswal report, the company’s revenue was up by 5.4 per cent quarter on quarter aided by the 8 per cent growth in the average revenue per user (ARPU) that the company saw after the December hikes.  

However, the report also notes that the VIL subscriber loss continued at 3.4 million (versus 5.8 million subscriber loss seen in Q3 FY22) to 243.8 million. Active subscribers also saw a decline of 3.4 million to 226.1 million. Data subscribers were flattish at 135.7 million.  

‘Clearing payables of Indus Tower’

In March, Vodafone Idea’s promoters infused additional equity into the cash-strapped telecom company of around ₹4,500 crore. “While VIL has not disclosed specific use of funds, this could be largely used to clear payables of Indus Tower along with some NCD repayments,” noted the Motilal Ostwal report. Therefore, additional fundraising for participation in 5G auctions is extremely necessary. 

UBS called VIL’s Q4FY22 results healthy, with headline numbers being slightly ahead of their estimates. “Capex increased from ₹10.5 billion in Q3 to ₹12.1 billion in Q4 and remains well below peers,” noted UBS. Thus, it is seeking clear commentary on the progress of future fundraising exercises. UBS gave the telco a neutral rating.  

Despite VIL’s subscriber loss moderation and the company being able to improve its revenue, the financial services company Nomura has decided to maintain its “reduce” rating for the loss-making telco.

“Without significant fund-raising, we think VI’s network investments and 5G rollout would remain constrained, at least in the near term, leading to further market share erosion. We maintain our Reduce rating on VI,” it said.

Published on May 11, 2022

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