India’s third-largest service provider Vodafone Idea recorded a loss of INR 79.9 billion ($0.96 billion) in the quarter ending December 2022 against INR 75.9 billion ($0.91 billion) in the same period a year ago, thus slipping further.
However, in a positive development, Vodafone Idea recorded an increase in average revenue per user (ARPU) from INR 131 ($1.58) in December 2021 to INR 135 ($1.63) in December 2022.
The subscriber story
Even so, Vodafone Idea’s subscriber base continues to erode, with the number of users decreasing from 267 million in November 2021 to 243 million in November 2022. Further, the subscriber base dropped to 228 million in the December 2022 quarter from 234 million in the previous September 2022 quarter.
It is further a sign of worry that the other private telcos — Bharti Airtel and Reliance Jio — have upped their rural focus, and Vodafone Idea has a significant percentage of rural subscribers through Idea Cellular, which was focusing on the country’s hinterland.
It is further likely to witness a drop in its subscriber base as the 5G network coverage of its competitors grows. Because of the debt, Vodafone Idea is the only private Indian telco that has yet to launch 5G services.
Media reports suggest that the company is in talks with the vendors to close 5G deals and is likely to launch the services soon. However, it has yet to clear the pending dues of the tower companies, like Indus Towers, and vendors Nokia and Ericsson. It will need to clear at least some part of the pending dues before it closes contracts for the 5G network.
However, its 4G subscriber base continued to grow, and it added 1 million 4G customers in the December 2022 quarter to take the total count to 121 million.
The debt woes
As per the last results, Vodafone Idea has a debt of INR 2200 billion ($26.59 billion). The Indian government recently acquired a stake of 33.44% in Vodafone Idea in lieu of interest. This makes it the largest stakeholder in the company. This didn’t come easy, with the government insisting that the promoters, Vodafone Group and Aditya Birla Group, also invest in the company. According to media reports, Aditya Birla Group has indicated an interest in making some investment, though it is unclear when and how much this investment is likely to be.
While the government certainly has given a breather to the company, it is not enough to make it competitive in the market. Commitment from the government, however, may help the company in acquiring investment or even closing vendor deals with payment plans stretched over a longer period.
The telco needs to make significant investments in upgrading its network and in expanding the 4G coverage. As per the media reports, Vodafone Idea is in talks with the banks to refinance INR 30 billion ($362 million) to INR 40 billion ($483 million) of the existing loans and also acquire new funds to upgrade the network.
Apart from the refinancing of the existing loans, the company might need another round of equity conversion from the government to not just survive but also make its presence felt in the market. The comeback is not going to be easy, but it is the need of the hour if Vodafone Idea wants to remain relevant.
What will really revitalize the company is the backing of an investor that is ready to support the company over the long term. While the government has taken a stake in lieu of the interest, this doesn’t provide the required funds for Vodafone Idea to make investments in network modernization, which is required for it to prevent subscriber churn and to start competing in the market.
This year is going to be crucial for the company as it will need to make a strong comeback in the market. Otherwise, it runs the risk of being relegated as a has-been or the third not-so-successful operator.