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Vi targets 5G readiness by FY26, plans customer expansion

Vodafone Idea (Vi) expects to be 5G-ready by the end of the next financial year (FY26) and will add more customers by upselling premium plans, Nuvama Institutional Equities said after a meeting with the telecom company’s leadership on Wednesday.

In an analysts’ report, it said Vi was on its way to becoming a ‘going-concern’ even though it was still not completely out of the woods.

“The (telco’s) management views tariff hikes as a necessity for the industry. It expects all three players to take part in tariff hikes, whenever it happens, just like they did in earlier rounds (akin to December-19, December-21),” it said.

Vi’s leadership also expects to increase its average revenue per unit (ARPU) further by continuously upgrading its subscribers from 2G to 4G. 2G subscribers currently form a sizable 42 per cent of Vi’s subscriber base as compared to 28 per cent for Airtel, Nuvama said.

The telco plans to complete initial capital expenditure related to tower and device infrastructure within six to eight quarters, while overall CapEx will be spread over the next three years, it said.

“We have long maintained that VIL needs three events to play out to survive – capital infusion, liabilities waiver and tariff hikes. With this capital raise, it has achieved one and enabled another. We believe VIL is on its way to a ‘going-concern’ now – though still not completely out of the woods,” Nuvama said.

Stars finally aligning
Arguing that the ‘stars are finally aligning for Vi’, Citi research, in an analysts’ note, said it had taken into account the telco’s recent successful Rs 18,000 crore follow-on public offer (FPO) as a reason for raising its forecast earnings before interest, taxes, depreciation, and amortisation (Ebitda) by 5-18 per cent by FY25-26.

This forecast assumes telco’s ARPU to increase by 60 per cent over 4 years to Rs 230 by FY28, backed by 15 per cent 4G tariff hikes each in the second quarter of FY25 and third quarter of FY26, Citi said. Vi’s ARPU stood at Rs 145 as of Q3FY24.

It also assumes the telco’s implied revenue market share will remain stable at 16 per cent levels, and the government exercising the option to part-convert its dues into equity after the moratorium ends in September 2025, among other factors.

While analysts continue to adopt a wait-and-watch stance with regard to Vi’s potential turnaround, some have changed their recommendation for Vi stock to ‘hold’ from ‘sell’. Citi has stressed a lot needs to fall into place – including tariff hikes, arresting the subscriber decline, and ideally culminating in some form of debt relief – for the financially beleaguered telco. Business Standard

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