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‘Vodafone Idea may see further upside on likely ARPU growth’

The brokerage has a buy rating on the stock with a target price of Rs 12.

ET Bureau|
Last Updated: Jun 09, 2020, 09.28 AM IST
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Vodafone Idea
Since the Vodafone Idea merger, the firm has lost 118 million subscribers, but this loss should slow, said CLSA.
Mumbai: CLSA sees a further upside in Voda Idea shares on likelihood of strong ARPU (average revenue per user) growth going ahead, resolution on adjusted gross revenue front and potential floor tariffs. The stock price has already doubled in the past one month.

“With the return of growth, led by tariff hikes, Vodafone Idea promoters may reassess incremental funding (promoters had contributed 72 per cent in the $3.5-billion rights issue of 2019), irrespective of the AGR case outcome. With the stock’s risk-reward still favourable, we reiterate buy,” said CLSA.

The brokerage has a buy rating on the stock with a target price of Rs 12. The stock jumped 6.4 per cent to 8.63 on Thursday after gaining 106 per cent in the last one month.

On the likelihood of ARPU growth, CLSA said Vodafone Idea’s mobile ARPU at Rs 109 has lagged Bharti Airtel by 19 per cent.
voda-graph

CLSA expects Vodafone Idea’s mobile ARPU to grow by about 30 per cent to 140, mainly led by tariff hikes. Vodafone Idea’s earnings before interest, taxes, depreciation and amortisation should jump 67 per cent by FY22, boosted by operating leverage.

Since the Voda Idea merger, the firm has lost 118 million subscribers, but this loss should slow, said CLSA.

Vodafone Idea has safeguarded its 23-million strong postpaid subscriber base which is 43 per cent higher than Airtel’s base and far ahead of Reliance Jio, the brokerage said. The key is data subscriber ramp-up which is likely to reach 162 million by FY22, the brokerage said.
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