Vodafone goes downhill in 7 circles

Vodafone Idea, which is lagging peers Reliance Jio and Bharti Airtel because of funds crunch and lower capex, has seen its revenue market share (RMS) fall to single digits in 7 out of the 22 circles in which the company provides services.

The telco’s revenue market share in Karnataka, Bihar, Orissa, Assam, North-East, Himachal Pradesh and Jammu & Kashmir is now in the range of 1.4-9.9%, while the same for Jio and Bharti is in the range of 31.5-58.2%.

RMS is calculated on the adjusted gross revenue (AGR) of the operators. At the end of April-June quarter, as per the latest figures released by the Telecom Regulatory Authority of India (TRAI), overall RMS of Jio was at 40.9%, followed by Bharti at 35.5%, with Vodafone Idea trailing at 17.7%. Barring Karnataka, which is an A category circle, the other six states are C-category circles.

The seven circles contribute 7.9% to Vodafone Idea’s overall AGR as per the April-June quarter numbers. In comparison, the same circles contribute 21.9% and 26.7% to the AGR of Jio and Bharti respectively.

“We believe the company’s market share erosion could continue. In addition, Vodafone Idea has 9,600 crore of debt repayment due in the next 12 months, which could put further pressure on the company’s ability to incur capex. We estimate6,400 crore of cash shortfall for Vodafone Idea by September, 2023 (assuming all debt repayable),” Goldman Sachs said in its recent report.

It has said that for the company’s competitive positioning to improve, Vodafone Idea will require a substantial amount of capital raise, and/or a tariff increase.

“We expect Vodafone Idea to continue to underperform peers; the company has lost about 19 percentage points of revenue market share over the last four years, and we believe it could lose more share if its 5G roll-out is unable to keep pace with peers, which could result in a sizeable proportion of its high-end subscribers churning out,” Goldman Sachs has added.

The department of telecommunications (DoT) has still not converted the telco’s deferred interest payment amount of 16,130 crore into equity. It has reportedly told the company that it needs to roll out 5G services as well as get some investors on board before the government converts the same. The development has put the telecom operator in a tough spot because it has been banking on the government to convert the interest accrued dues into equity.

This would give the government a 33% stake in the company, thereby providing comfort to potential investors which would help it in the fund raising exercise. “We don’t know the reason exactly why this (equity conversion) is not happening. The government has taken some time…so we continue to engage with DoT and expect that this should happen soon,” Akshaya Moondra, CEO, Vodafone Idea had said at the post-earnings analyst call last week when asked for the reasons behind the delay in the conversion of dues into equity by the government. “From our point of view, we had exercised the option to convert in January.

Post that we also had a discussion with DoT, and they had sent a letter to us in March, after which we had confirmed the amount of conversion, which was agreed between DoT and us in the month of April. Post that we have not had any communication from DoT in this matter,” Moondra had added. He said that the lack of funds is one of the key reason for the delay in the roll out of the 5G services. Vodafone Idea is looking to raise25,000 crore but so far the promoters have been able to infuse only 4,940 crore.

For the quarter ended September, Vodafone Idea’s net loss widened to7,595.5 crore on a sequential basis due to higher finance cost and network operating expenses. Consolidated revenues rose nearly 2% sequentially to Rs 10,615 crore owing to additions in the 4G subscribers and increase in average spends by consumer on its network. PTI