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Vodafone Idea Ltd has been an organization in decline for a while now. But the corporate’s June quarter results present that issues have gone unhealthy to ugly. Hefty tariff hikes in December had helped Bharti Airtel Ltd and Reliance Jio Infocomm Ltd report income progress of 15-18% in the previous two quarters. In Vodafone’s case, it’s virtually as if the tariff hikes by no means occurred. Its revenues have fallen 4% in the previous two quarters.
Average income per person (Arpu) rose simply 4.6%, far decrease than the 16.3% bounce in Airtel’s Arpu in the previous two quarters. “The modest sub-5% improve in Arpu is baffling. This both displays a deteriorating high quality of the 4G subscriber base or down-trading inside this section – a worrying signal, both approach,” analysts at Kotak Institutional Equities mentioned in a notice to shoppers.
Vodafone’s subscriber base has fallen by 8% since end-December, shedding market share to Reliance Jio and Airtel in the method. The bulk of the decline in the subscriber base is exterior the 4G section. As such, its Arpu ought to have elevated at a a lot sooner tempo, with the higher-value 4G subs now making up a better proportion of the full base. But the truth that the Apru doesn’t even mirror the tariff hikes taken in December is clearly a worrying signal.
“With Vodafone selectively investing in 4G networks, retaining premium clients is proving to be robust,” Rajiv Sharma, head of analysis at SBICAP Securities Ltd mentioned.
Vodafone’s money place has weakened additional. In end-June it reported a money stability of Rs3500 crore, and it has since made funds value Rs3900 crore to the federal government and to debt mutual funds, the place some debt fee was due. Note additionally that the corporate’s web debt elevated by Rs3000 crore regardless of capex of simply Rs600 crore. As such, money burn of round Rs2500 crore continues on a quarterly foundation, even earlier than contemplating capex.
When extra debt repayments grow to be due, the corporate might be in a decent spot to fulfill its obligations, the way in which it’s positioned financially. In Q1, it managed to prop up Ebitda via aggressive price cuts. But of what worth is cost-cutting when revenues are declining at a speedy tempo.
Investors had thought that the hefty tariff hikes in December would give Vodafone Idea a short-term prop, and certainly, the March quarter results had supplied some hope. But Q1 results have proven that the corporate’s troubles run far deeper. “Essentially, from a sector standpoint, Vodafone Idea’s results solely reaffirm our core thesis – large value hikes or a two-player market!” analysts at Kotak mentioned.
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