Credit Suisse estimates that Vi needs $1 bln in 6-9 months to repay debt

Vodafone Idea (Vi) will need at least $1 billion within the next six-nine months to repay its non-spectrum debt and compete against rivals Bharti Airtel and Reliance Jio (Jio) with limited capex.

Shares of Vi were trading at Rs 10.07, down 2.61% on the BSE during noon trading hours.

“While the government’s relief package providing four-year moratorium eases immediate cash flow constraints for VIL, it needs about US$1 billion, at the very least, over the next 6-9 months to repay its non-spectrum debt and ride through these four years with minimal capex,” said brokerage firm Credit Suisse.
The telco has accepted the government’s four-year moratorium under which it will pay previous adjusted gross revenue (AGR) and spectrum dues only after FY25-26, which, analysts estimate, may give it a Rs1 lakh crore cash flow relief. The cash-strapped telco had past AGR dues worth Rs 58,254 crore, of which it has paid Rs 7,854 crore.

The operator is aggressively trying to raise funds and its promoters may also invest some money for the telco to improve its customer tractions and revenue market share.

Last week, Vi posted a net loss of Rs Rs 7,144.6 crore for the fiscal second quarter from Rs 7,312.9 crore in the previous quarter, supported by a rise in average revenue per user (ARPU) on the back of segmented price hikes, even as the loss of subscribers slowed.

The telco’s ARPU rose to Rs 109 from Rs 104 (Q1) but remains much lower than rivals Jio and Airtel’s Rs 144 and Rs 153 respectively. Quarterly revenue for the cash-strapped operator increased to Rs 9,406.4 crore in the July-September quarter from Rs 9,152.3 crore in the fiscal first quarter.

Vi said that the 2.8% quarterly growth in revenue was aided by pick up in the economic activities and easing of lockdown/restrictions induced by a severe second wave of COVID, which had impacted the first quarter of the fiscal.
Analysts have noted that subscriber loss, improved ARPU and cost efficiency are positive signs but telco still is not over the main hurdles.

“The onus now shifts to the company to successfully complete its capital raise, accelerate network investments, stem sub losses, and (eventually) raise ARPUs, all of which come with their fair share of challenges & uncertainties…,” said Citi in its report, post the Q2 results.

Nomura highlighted that the telco born out of merger with Vodafone India and Idea Cellular had lost 17% market share since its merger in 2018, driven by lower network investments. Quarterly capex spending for 4G expansion rose to Rs 1,300 crore from Rs.940 crore in Q1.

“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,” said Nomura;s analysts.

While Citi said it remained “on the sidelines and continue with our preference for Bharti”, brokerage firm Credit Suisse retained “cautious view on VIL given debt servicing issues over the longer term”. URALL News