Vodafone Idea Q4 loss likely to decrease

New Delhi: Vodafone Idea Ltd. (VIL) is likely to report lower losses and higher revenue sequentially for the quarter to March, the first full quarter when the ailing telecom operator will reap the benefit of the tariff hikes of up to 40% it had imposed in December 2019, said analysts.

VIL’s loss after tax for the fourth quarter of 2019-20 is expected to fall to Rs 4,268 crore from Rs 5,805 crore in the previous three-month period, on likely quarterly consolidated revenue of Rs 11,494 crore, up 3.6%, according to a forecast by brokerage firm Axis Capital.

Rival Bharti Airtel had posted a loss of Rs 5,237 crore for the quarter, hurt by a one-time charge, but its India business showed continued recovery. Market leader Reliance Jio Infocomm posted a profit of Rs 2,331 crore.

Shares of VIL ended 7.03% higher at Rs 11.12 on the BSE on Monday, when the Sensex closed 0.60% lower, a day ahead of the telco announcing its results.

“Revenue improvement will be helped by tariff hike taken in December 2019, though the full impact is expected only in H1FY21 as more users come for recharge,” brokerage firm Axis Capital said in a report.

Credit Suisse said that due to the lockdown in the wake of Covid-19, full flow through tariff hikes is likely to be delayed, as against the earlier expectation of full flow through by the April-June quarter.

ICICI Securities said it expects some synergy benefit offset by an increase in termination cost and higher regulatory payout on adoption of the new adjusted gross revenue (AGR) definition.

Analysts, however, expect VIL to lose 5-15 million customers due to SIM consolidation and lockdown impact. “We expect subscriber exits to continue in Q4 with more low-ARPU (average revenue per user) subscriber exits amid SIM consolidation,” said Axis Capital. At the end of December, VIL had 304 million subscribers.

The telco’s ARPU, a key performance metric, is predicted to increase 12% to Rs 122 from Rs 109. But that would still be sharply below Airtel and Jio’s ARPUs of Rs 154 and Rs 130.6, respectively, during the fourth quarter.

“While the operating performance is likely to be strong, balance sheet concerns for the sector persist, especially for VIL, which is facing business continuity risk due to the large adjusted gross revenue (AGR) liability it faces,” brokerage firm BNP Paribas had said in a report.

The Supreme Court directed the telcos and the government earlier this month to finalise a road map for payment of balance licence fee and spectrum usage charge (SUC) dues, which may include an upfront payment clause. VIL’s total liability towards licence fees, SUC, interest and penalties is more than Rs 58,000 crore, of which it has paid Rs 6,854 crore. It has repeatedly said that it will be forced to shut shop if it has to pay up its total dues at one go.

VIL’s earnings before interest, tax, depreciation and amortisation (EBITDA) could increase 13.4% sequentially to Rs 3,878 crore. Data usage per subscriber per month could increase to 10 GB from 9 GB, according to an estimate by Emkay Research, while voice minutes per user per month are expected to go up to 687 from 674 in the previous quarter.