A glimmer of hope has emerged for beleaguered Vodafone Concept, which noticed its common income per person – a key metric – rising for the third consecutive quarter, even because it continues to publish large losses and a mountain of debt. is dealing with.
Segmented tariff hikes made in July final 12 months and broader progress on the finish of 2021 helped the telecom provider report a sequential 3% progress in third quarter income, led by over 5% progress in ARPU. With one other spherical of tariff hikes anticipated this 12 months, the metric is probably going to enhance additional. Whereas that is an encouraging signal for the corporate and its buyers amid dangerous information, analysts say contemporary capital and determination of debt points can solely assist preserve the corporate afloat.
“These are some optimistic indicators and are more likely to proceed within the subsequent quarter as nicely. However V nonetheless has an extended method to go to get again on observe,’ says Charu Paliwal, analysis analyst at Counterpoint Analysis. “Bridging the 4G protection hole and competing successfully requires larger capital expenditure. The fundraising train wants to finish quickly to ensure that the community to have the ability to enhance funding.”
In fact, Vodafone Concept spent solely Rs 3,300 crore on its community within the 9 months to December, in accordance with Nomura, whereas bigger rival Bharti Airtel spent Rs 4,600 crore within the July-September quarter alone. The capex expense for Vodafone Concept stood at Rs 1,050 crore, in comparison with Rs 6,101 crore for Bharti within the December quarter.
As operators improve prospects from 2G to 4G and deepen the protection throughout an enormous geography, they should put money into the community usually to supply uninterrupted protection. Vodafone Concept, with its mounting debt burden and string of losses, has not been in a position to preserve tempo, shedding prospects and market share to rivals Reliance Jio Infocomm and Bharti Airtel.
One other tariff hike?
Analysts are of the view that telcos could resort to a different hike in costs this 12 months because the costly 5G auctions method. In November final 12 months, telcos had elevated costs by 20-25 per cent.
Bharti Airtel CEO Gopal Vittal just lately stated that the corporate wouldn’t hesitate to go forward with one other spherical of tariff hikes in 2022, because it desires to extend the ARPU to Rs 200 and finally to Rs 300 this calendar 12 months. Nonetheless, not less than within the subsequent 3-4 months, there was no risk of any progress.
Vodafone Concept, now the smallest of the three personal gamers available in the market, nevertheless, must tread fastidiously.
Telecom knowledgeable Mahesh Uppal says, “There are two considerations. “If opponents do not elevate costs, the telecom firm that raises them will grow to be uncompetitive. And second, elevating costs to enhance ARPU can drive away prospects and undo ARPU progress.
The truth is, Vodafone Concept misplaced prospects final 12 months resulting from tariff hikes. Analysts partly attributed the rise in costs to customers gifting away a couple of SIM card to make up for misplaced prospects.
“The telecom market desires a sustainable tariff hike,” says Uppal.
Final month, Vodafone Concept CEO Ravinder Takkar on the tariff hike stated, “It’s doable that there could also be one other value hike in 2022, however absolutely there will probably be a value hike in some unspecified time in the future. The final one was about 2 years in the past which is a bit lengthy I believe. We would definitely count on lower than two years however in 2022 we must see how shortly these costs add up. Perhaps, it may even be 2023.”
Regardless of the latest hike, India’s common cell information value is round $0.3 per GB, which continues to be among the many lowest globally, with the most cost effective information plans costing simply $0.1 per GB and giving operators headroom to extend tariffs. Was once. Based on information from Crisil Analysis, costs per GB vary between $8-$10 per GB in america, China, and South Korea, with the most cost effective plans costing between $0.6-$2 per GB.
On the finish of December, Vodafone Concept’s gross debt stood at Rs 1.99 lakh crore, which included Rs 1.76 lakh crore to the Indian authorities. Based on Nomura, regardless of the four-year moratorium, it has a debt compensation of Rs 11,300 crore within the subsequent 12 months, and would require exterior fundraising and sharp tariff hikes to fulfill the compensation.
It provided an fairness stake of Rs 16,000 crore to the federal government in return for some dues, however is but to say whether or not the telecom ministry has agreed to that supply.
Whereas the tariff hike could assist Vodafone Concept to some extent, it’s not sufficient to restart the enterprise and stop additional enhance in authorities stake when the dues grow to be due later after the moratorium interval is over,” Counterpoint Okay Paliwal says.
Vodafone Concept has been making an attempt to boost funds since 2020 with little success up to now. The corporate’s MD Ravinder Takkar had just lately stated that it will shut the fundraising by March this 12 months.
“With out vital fund-raising, we count on VI’s community funding and 5G rollout to be disrupted, not less than within the close to time period, resulting in an extra decline in market share,” Nomura says. A doubtlessly massive fairness dilution can also be seen as a draw back to any exterior fundraising.
Even Vodafone Concept’s auditor SR Batliboi & Associates stated in January that the provider’s potential to proceed as a going concern has the potential to boost extra funds, profitable negotiations with lenders for continued help and its operations. relies on the technology of money flows from
Within the absence of another speedy optimistic set off, the tariff hike is the one method for the provider to enhance its monetary place.
“The long run well being of Vodafone Concept will probably be assured solely after fundraising. Uppal says that with the tariff hike and a few fairness switch to the federal government, it’s positively higher than earlier than. Rather a lot will rely upon what the market and the federal government do within the coming months.