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Voda Idea ARPU needs to jump 83% to meet FY23 cash needs

Vodafone Idea shares closed nearly 2.5 per cent lower at Rs 5.89 on BSE Wednesday.

, ET Bureau|
Nov 28, 2019, 07.44 AM IST
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Kotak’s estimates are based on the assumption that Voda Idea retains its 310 million user base even after hiking tariffs.
Kolkata: Vodafone Idea would require around an 83 per cent jump in its average revenue per user (ARPU) — a key performance metric) — from current levels to meet an estimated Rs 30,100 crore cash outflow obligation (including deferred spectrum dues) from FY23, when the telco resumes payments to the government for airwaves, analysts said.

Kotak Institutional Equities estimates Vodafone Idea would require significantly higher ARPU “in the Rs 180-to-212 range” in FY23 — from its current level of Rs 107 reported in the July-September quarter — to meet cash outflow obligations “under various scenarios of relief” on its Rs 53,038.6 crore adjusted gross revenue-related liabilities, in absence of any “meaningful equity infusion” by the promoters.

The brokerage estimates Voda Idea’s annual cash outflow) — even if 50 per cent of its AGR liabilities are waived) — would add up to Rs 30,100 crore in FY23, including Rs 15,800 crore of deferred spectrum payouts, Rs 5,100 crore of deferred AGR-related payouts, Rs 1,200 crore in nonspectrum related interest costs and Rs 8,000 crore annual capex to merely stay competitive.

To meet such a cash outflow need, Vodafone Idea, it estimates, would require a monthly APRU of Rs 196, which would rise further to Rs 212, in the absence of any waiver on its AGR dues.

Kotak’s estimates are based on the assumption that Voda Idea retains its 310 million user base even after hiking tariffs.

Vodafone Idea shares closed nearly 2.5 per cent lower at Rs 5.89 on BSE Wednesday.

Brokerage CLSA said even if Voda Idea hikes tariffs by 30 per cent from current levels, “the company will likely find it difficult to service (around) Rs 16,000 crore of annual spectrum payments two years from now”.

The extent of tariff hikes, it said, would hinge on the telecom regulator’s decision) — likely by the month-end) — on whether or not it postpones the planned scrapping of interconnect usage charges (IUC) from January 2020.

Experts said mere deferment of spectrum payments by two years will only offer temporary relief to the struggling incumbents, Vodafone Idea and Bharti Airtel, who recently raised doubts over their ability to continue as going concerns after posting unprecedented losses of Rs 50,922 crore and Rs 23,045 crore, respectively, for the July-September quarter, after provisioning for AGR-based dues following a recent Supreme Court ruling.

Jefferies said Voda Idea’s price hike plans from December “is positive, but given (the company’s) high leverage, it expects the telco “to implement a basic 4G roll out that would be lower than peers (read: Reliance Jio and Airtel), and consequently, lose market share”.



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