AGR dues widen Vodafone-Idea’s loss to Rs 25,467 cr; telco lost more than it made in last 2 quarters

Vodafone Idea on Thursday once again posted one of its biggest losses during the April-June quarter at Rs 25,467 crore, largely weighed down by its adjusted gross revenue dues.

Vodafone Idea on Thursday once again posted one of its biggest losses during the April-June quarter at Rs 25,467 crore, largely weighed down by its adjusted gross revenue dues. The losses were much wider than Rs 11,643.50 crore the company had incurred during the preceding quarter and much higher than Bloomberg consensus estimate of Rs 5,545.93 crore.

During the quarter the company provisioned Rs 19,440 crore towards its AGR dues and once again stated that its ability to continue as going concern is essentially dependent on a positive outcome with regard to the timeframe for the payment of AGR dues to be made in installments and successful negotiations with lenders. The company said that its net worth has turned negative.

As reported earlier, the Supreme Court has reserved its order on the firm’s plea to be allowed to pay in installments, ideally spread over 20 years but not lesser than 15 years. Total dues of Vodafone Id-ea is `58,250 crore and so far it has paid closed to Rs 8,000 crore. Provisioning for AGR apart, operationally also the company’s performance was weak during the quarter with revenues at Rs 10,659.30 crore sequentially declining by 9.3%.

Revenues missed Bloomberg estimate of Rs 11,006.87 crore. Unlike its peers, Bharti Airtel and Reliance Jio, Vodafone Idea saw its average revenue per user decline by 5.8% sequentially at Rs 114. This could possibly be due to extension of validity of low cost customers during lockdown as well as Sim consolidation by its customers. The company’s Arpu is the lowest in the industry, however, in the preceding quarter it had beaten Jio mainly on the back of tariff hike in December, 2019.

The precarious position of the company, financially can be gauged from the fact that its cash and cash equivalents stands at Rs 3,450 crore while its net debt is at Rs 1.16 lakh crore. On the company’s critical financial position and long-term viability, brokerage Credit Suisse had written after the Q4 results, “While we think Vodafone Idea can manage its cashflow needs till FY22 mainly on account of a two year moratorium on deferred spectrum debt, we believe the company may find it challenging to service AGR dues in case tenure for staggered payment is short (less than 10 years)”.

The Ebitda (earnings before interest, tax, depreciation and amortisation) declined 6.4% sequentially at Rs 4,098 crore. Ebitda margins came in at 38.4%, an increase of 110 basis points q-o-q due to lower marketing and administrative costs.

The company’s subscriber base during the quarter declined by 11.3 million to 279.8 million. Its 4G subscriber base also saw a decline of 1 million QoQ to 104.6 million, clearly reflecting the pressure on its high paying customers. Even the post-paid subscriber base at 21.5 million was down by 1.5 million QoQ.

Total voice minutes on the network during the quarter stood at 5,78,548 million minutes, a decline of 6% q-o-q,while the average minutes per user, per month, stood at 678, which was down 1.4% sequentially. However, strong data volume growth of 10.6% sequentially at 45,22,721 million MB the highest in the last six quarters, as data usage per broadband subscriber increased 14.5% q-o-q to 13 GB per month, was higher compared to Jio’s data usage per subscriber.

Capex spend in Q1FY21 of Rs 600 crore was lower compared to Rs 1,820 crore in Q4FY20, as the rollout in Q1 was impacted by Covid-19 with disruptions to equipment supply and logistics following the nationwide lockdown.
The company has also classified Rs 14,280 crore from ‘non-current’ to ‘current maturities of long term debt’ for not meeting certain covenant clauses under the financial agreements for specified financial ratios as at March 31, 2020. “We have exchanged correspondences/been in discussions with these lenders for the next steps/waivers. Of the above, during the quarter, we have received waivers for borrowings amounting to Rs 4,500 crore,” a company statement said.

Vodafone Idea said that it has realised its targeted annualised opex synergies of Rs 8,400 crore well ahead of the original timeline and has rolled out a further cost optimisation plan. Through this exercise, the telco plans to achieve Rs 4,000 crore of annualised cost savings over next 18 months. “As a step in that direction, we are in the process of organisation wide restructuring,” it said.