Vodafone Idea posts Q1 Results; Reflects Shrinking Revenue, Increasing Debt

On Saturday, Vodafone Idea posted its statistics for the first quarter of the quarter ended June. The third largest telco showed a steady decline in revenues as its cash reserves dry up, debts mount and the situation slowly spirals into an uncontrollable mess.

Vodafone Idea posts Worrying Financials

The telco reported a net revenue of ₹9,150 crore, which was down 4.7% sequentially. However, the telco cited the COVID-19 pandemic's second wave as the reason for the slowdown. Furthermore, the telco's EBITDA stood at ₹3,710 crore, with margins down by 5.1% at 40.5% this quarter. Not only that, Vodafone Idea spent less too; its Capex spend stood at ₹940 crore, down from ₹1,540 crore a quarter before. All of this indicates an acute shortage of cash, and the inability of the telco to generate enough money from operations.

The mounting debts has not helped the telco's cause either. Vi reported ₹1.915 trillion in debt, up from ₹1.8 trillion the quarter before. This debt comprises of deferred spectrum payment obligations of ₹1.060 trillion, AGR liability
₹62,180 crore and regular debt ₹23,400 crore. The telco had a cash reserve of ₹920 crore, much better than the last quarter's ₹300 crore. This meant that the telco's net debt stood at 1.9067 trillion.

What's more worrying is the fact that the telco's ARPU dipped further to ₹104, from an already abysmal ₹107 in Q4FY21. However, apart from their financial woes, Vodafone Idea was actually able to generate more engagement from its customers.

A Silver Lining?

The telco recorded a data volume growth of 13.2% sequentially, which showed that the telco can engage its customers; the usage jumped to 14.6 GB/month from 12.8 GB/month the quarter before. However, that did not do much to hinder the constant customer loss the telco has faced; its subscriber base reduced by by 12.3 million over the quarter, taking the base to 255.4 million in Q1FY22.

In a positive, though, its 4G subscriber base remained "resilient" at 112.9 million vs 113.9 million in Q4FY21.

The telco has seen a mixed bag in terms of telecom performance - on one hand, its 4G base remains strong and engaged, while on the other hand, it has constantly lost its ground. Moreover, the shrinking APRU has caused a decrease in revenues and cashflows, putting the telco in a right fix.

The telco also reported that it has achieved merger opex synergies of ₹8,400 crore. Furthermore, in a bid to cut costs, it has set a target to save ₹4,000 crore annually by end of this calendar year. Incidentally, Vodafone Idea has already saved about 70% of that amount, which suggests that the telco still has a fight in it.

Ravinder Takkar, MD & CEO, Vodafone Idea Limited, said, "the severe second wave of COVID caused significant
disruptions and slowdown in economic activities. During these challenging times, VIL continued to serve its customers
and community at large by providing seamless connectivity as well as maintaining superior quality of services".

Takkar also said, "we continue to focus on executing our strategy to keep our customers ahead, and our cost optimization plan remains on track to deliver the targeted savings".

He added, "we are in active discussion with potential investors for fund raising, to achieve our strategic intent".

What can Vodafone Idea Do?

For now, the telco desperately needs a cash injection from somewhere to cope with its dues; just a moratorium won't prove to be enough as the dues won't just disappear. The telco also needs to arrest its falling APRU and look for ways to increase that.

Regardless of their performance, the customers are behind the telco. The Vodafone Idea board should take that as a sign and look to avoid antagonizing the same.