Vodafone Idea revenue dips in 19 circles and faces cash crunch

Vodafone Idea CEO Ravinder Takkar has joined the company at a time when the telecom operator started facing turbulent business conditions.
Vodafone Idea 4G network
Vodafone Idea, which started positioning as India’s # telecom operator based on mobile phone subscribers, has reported drop in revenue market share in 19 telecom circles in June quarter of 2019 as compared with March quarter of 2018.

Vodafone Idea has achieved quarterly revenue growth in three telecom circles including Kerala, Himachal Pradesh and Uttar Pradesh East.

Vodafone Idea has generated revenue of INR 6,066 million (+1.9 percent) in Kerala, INR 4,430 million (+0.2 percent) in Uttar Pradesh East and INR 124 million (+26.5 percent) in Himachal Pradesh.

Vodafone Idea to exit telecoms

Vodafone Idea’s quarterly revenue

Vodafone Idea’s quarterly revenue was INR 2,012 million (–13.6 percent) in Delhi, INR 3,974 million (–10.1 percent) in Mumbai, INR 1,793 million (–6.9 percent) in Kolkata, INR 9,587 million (–5.8 percent) in Maharashtra, INR 6,435 million (–6.9 percent) in Gujarat, INR 4,789 million (–5.2 percent) in Andhra Pradesh, INR 3,176 million (–3.8 percent) in Karnataka, INR 5,860 million (–6.5 percent) in Tamil Nadu, INR 1,938 million (–9.4 percent) in Punjab, INR 989 million (–15.1 percent) in Haryana, INR 3,434 million (–7.2 percent) in Uttar Pradesh West, INR 2,189 million (–9.1 percent) in Rajasthan, INR 4,046 million (–2.5 percent) in Madhya Pradesh, INR 3,064 million (–5.2 percent) in West Bengal, INR 1,416 million (–7.9 percent) in Bihar, INR 540 million (–18.5 percent) in Orissa, INR 846 million (–10.5 percent) in Assam, INR 339 million (–5.6 percent) in North East and INR 164 million (–9 percent) in Jammu & Kashmir.

Vodafone Idea announced resignation of CEO Balesh Sharma at a time when the company started revealing its poor performance. Vodafone Idea CTO Vishal Vohra, who has been credited for the timely integration of the two networks, is continuing with the company despite missing its revenue growth in integrated circles. In fact, Vodafone Idea said it has improved Internet speed in integrated circles.

Goldman Sachs Global Investment Research and ICICI Securities were the first to alert investors about the weakening financial conditions and deteriorating revenue streams at Vodafone Idea.

Goldman Sachs said Vodafone Idea will be free cash flow negative in the foreseeable future, with net-debt-to-EBITDA at about 11x even in FY21. This is likely to constrain the company’s ability to make network investments, and Vodafone Idea’s high-end customer base could be at risk.

Airtel will add 4x the number of wireless broadband subscribers on its network as Vodafone Idea, and Airtel India’s revenue growth will be 6-7 percentage points higher vs. Vodafone Idea over the next three years.

Airtel India’s market share will remain stable at around 31-32 percent during this period as Airtel will win market share from Vodafone Idea. Vodafone Idea has 110 million 3G / 4G subscribers, and given the company’s weaker balance sheet and lower Capex, some of its subscribers could potentially be at risk of churning out, said Goldman Sachs.

Vodafone Idea had a net-debt-to-EBITDA ratio of 18x as of June 2019 including potential proceeds from tower sale. The company has a gross cash balance of $3 billion as of June 2018. Vodafone Idea’s cash burn rate remains high at close to $600 million per quarter.

Vodafone Idea may need to raise additional capital in four to five quarters, or potentially scale back operations in some service areas. Vodafone Idea’s current cash-burn rate would imply the company’s cash balance could reach very low levels by September 2020.

Baburajan K