Vodafone Idea revenues benefit from tariff hikes, ICICI Securities

Vodafone Idea’s (VIL) Q4FY22 cash EBITDA at Rs21.2bn was higher than our estimate due to a one-off gain, while revenues came in-line. ARPU rose 7.8% QoQ to Rs124 and VIL said most part of tariff hikes taken in Nov’21 is captured in the revenues. Future ARPU growth will depend on 4G net sub-add, monetisation of digital properties and more tariff hikes. Annualised EBITDA (excluding the one-off) is Rs79bn, which is short of the requirement to meet cash liabilities. VIL has Rs60bn bank debt repayment and capex in FY23. Further, 5G auctions are expected in the next quarter, which may require some cash to be paid upfront (though TRAI has recommended total payment in EMIs). Promoters have infused Rs45bn equity in FY22. However, the company is yet to complete the Rs100bn fund raise it has been negotiating for many quarters now. VIL is significantly lagging peers on 4G investment, which is also the road to 5G.

• 4G subs add unexciting: VIL’s sub net loss at 3.4mn was probably due to incremental hit from SIM consolidation on tariff hikes in Nov’21. Postpaid subs rose by 0.2mn to a total of 20mn. Gross sub addition rose to 21.9mn (vs 19.9mn in Q3FY22); however, higher churn rate led to net sub loss. 4G sub adds are still struggling and stood at 1.1mn to take the total to 118mn. Minutes declined 2.8% QoQ (15% YoY) to 452-bn. Data usage was flattish QoQ (+7.8% YoY) at 5,237bn-MB.
• Tariff hike benefits captured in revenues. Our working shows VIL’s mobile revenues were up 5.8% QoQ (+5.8% YoY) to Rs91bn. Revenues benefited from the ~20% price hikes taken in Nov’21. ARPU was up 7.8% QoQ (+15.9% YoY) to Rs124. ARPU has grown 16% in past two quarters, and VIL said Nov’21 tariff hike benefit has largely been captured in the revenues. ARPU growth in future will be driven by 4G sub-add, revenues from digital properties, and likely frequent tariff increases. Management also hinted at higher tariff hikes to be taken in the unlimited data segment and 2G to have relatively lower inflationary impact. Thus, 4G customer growth becomes doubly important for VIL.
• Cash EBITDA (adjusted for Ind-AS 116) at Rs21.2bn. EBITDA at Rs47bn was up 21.8% QoQ (5.5% YoY) and included a one-off benefit of Rs1.5bn. Q4FY22 annualised cash EBITDA (excluding the one-off) was Rs79bn (sufficient to run the operations efficiently). Net loss during Q4FY22 stood at Rs65bn. Capex for the quarter was Rs12bn (11.8% of revenues) and Rs45bn for FY22 (significantly lower vs peers). Some cost benefit is expected from tower rental renegotiations, which are yet to conclude.
• Net debt piles up to Rs1,964bn. This includes deferred spectrum liability of Rs1,139bn, AGR liability of Rs660bn and bank borrowing of Rs180bn. Bank borrowing has dipped from Rs230bn in Q3FY22 post successful repayment of NCDs. Debt payable in next 12 months is Rs82bn, and release of certain cash from bank guarantee will reduce payables to Rs60bn, which the company has to meet from internal accruals.
• DOT has confirmed Rs161bn as debt conversion into equity. DOT computed the NPV of interest liability during moratorium period at Rs161bn towards spectrum and AGR dues. This means government would own 30% equity stake in VIL, and promoters’ (Vodafone Plc and Birla Group) stake will shrink to 50% (from 75% now).

For complete report click here – https://www.communicationstoday.co.in/vodafone-idea-revenues-benefit-from-tariff-hikes/

CT Bureau