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Voda Idea Says Flush With Funds For 2 Years, Even Sans Tariff Hike

Vodafone Idea’s leadership said the company will be well funded for two years even without a tariff hike as the telecom market leader expects to access Rs 65,600 crore of funds from multiple sources, which will take care of its capital expenditure (capex) needs as well as spectrum payments.

VIL also said its upcoming Rs 25,000 crore rights issue, a key element of its fund’s availability forecast, is on track.

“The Vodafone Idea management seemed confident of the upcoming Rs 25,000 crore rights issue going through, and expects operating income (Ebitda) to increase even in the absence of a tariff increase, driven by synergy benefits and revenue increase,” BNP Paribas, which participated in an analyst meeting, said in a note, a copy of which was seen.

VIL’s management, the brokerage said, expects Rs 65,600 crore of funds availability over the next two years through a combination of existing cash reserves (Rs 15,600 crore), the rights issue (Rs 25,000 crore), a potential Rs 5,000 crore proceeds from an (11.15%) stake sale in Indus and an estimated Rs 20,000 crore of Ebitda (accruals) over the next two years, which will exceed the company’s Rs 55,700 crore funds requirement during this span.

The telecom market leader told analysts its principal funds requirement over next two years, aggregating Rs 55,700 crore, would go towards Rs 21,000 crore capex (net of Rs 6000 crore vendor credit), Rs 21,300 crore of spectrum payments and repayment of external debt, totaling Rs 13,400 crore.

Shares of VIL closed nearly 1% higher at Rs 31 on BSE Thursday.Credit Suisse, which also participated in the analyst meet, however, said VIL’s projected Ebitda improvement from Rs 4400 crore currently to Rs 12,000 crore by end FY20 is a tad optimistic, hinging on sharp market recovery in addition to synergies coming through. It added that the “absence of VIL’s asset sales like fibre in the (funding) math allows for some misses”.

“Vodafone Idea’s management in all its projections over two years expects (revenue) market share to be equally split across three operators—VIL, Airtel and Jio—and this is the biggest element of risk, since Jio’s cashburn and capex appear commensurate with its target of reaching 50% RMS in contrast to VIL’s equal market share expectations,” Credit Suisse said.

VIL said its network integration would be concluded by June 2020, and the immediate target is to increase capacity to 1.5x of October 2018 levels by March 2019, and 2.5 times by March 2020. The company stuck to its guidance of reducing 22,000 sites, although the management said the company will not rush on this leg of (site) reductions, keeping customer experience in mind, Credit Suisse said.—Bullfax

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