Vodafone Idea Q4 preview: Losses may narrow; commentary on fundraising eyed

Vodafone Idea is set to announce its March quarter results (Q4FY21) on Wednesday, amid expectations of narrowing of losses even though subscriber losses and zero IUC regime may dent the top-line. Besides, the telecom operator's average revenue per user (ARPU) is also seen declining around 10 per cent year-on-year (YoY).

The management's commentary on fundraising, tariff hikes, and adjusted gross revenue (AGR) case will be keenly watched, apart from the headline numbers. "VI has not been able to raise money till now despite continually engaging with investors. This fund-raising is crucial for VI considering there has not been any tariff hike as anticipated by Street. We believe that a tariff hike will take place only if VI is able to raise sufficient capital to invest in the network," Edelweiss said.

At the bourses, Vodafone Idea underperformed (down 13 per cent) in the quarter under review as compared to 3.68 per cent rise in the benchmark S&P BSE Sensex in the same period, ACE Equity data show.

Here's what leading brokerages expect from Vodafone Idea's Q4FY21 numbers:

Edelweiss

The brokerage expects Vodafone Idea's top-line to decline by 17.1 per cent YoY to Rs 9,740 crore, led by a 10 per cent sequential ARPU decline due to interconnect usage charges (IUC) going away and 20 lakh subscriber losses. In comparison, the company had posted a revenue of Rs 11,754.2 crore in the year-ago quarter.

Besides, Vodafone Idea is seen reporting a loss of Rs 6,258.1 crore for the quarter under review as compared to a loss of Rs 11,643 crore in Q4FY20, although the company's losses in the year-ago quarter also comprised exceptional items of Rs 6,141 crore on items related to AGR dues and one-time spectrum charge.

"Lower numbers of days during the quarter will offset the gains from up-trading for Vodafone Idea. We expect earnings before interest, tax, depreciation, and ammortisation (Ebitda) to increase 0.9 per cent QoQ to Rs 4,325.6 crore, as cost-cutting initiatives will offset the impact of IUC net-revenue loss," the brokerage said.

Emkay

Emkay believes that Vodafone Idea's ARPU should be impacted by zero IUC and should see a dip of 10 per cent to Rs 109, resulting in an 11 per cent decline in wireless revenues. "In terms of headline number, Vodafone Idea is expected to clock net sales of Rs 9,831.7 crore, down 16.4 per cent from the year-ago period while loss may come in at Rs 6,535.9 crore. Ebitda margin is seen expanding 535 bps YoY to  42.6 per cent," the brokerage said.

"Data volumes and total minutes on the network is expected to rise 5 per cent and 2 per cent QoQ, respectively. The absence of IUC revenues shall impact Ebitda -- down 4.4 per cent YoY to Rs 4,189.4 crore -- as the company was a net receiver. The company’s data subscriber additions (41 lakh) should be in the positive territory for the third consecutive quarter, with 41 lakh additions, although this is the lowest among peers," it said.

Motilal Oswal

The brokerage, in the result preview note said, "On the ARPU front, the end of IUC charges as per the TRAI order should reduce Vodafone Idea's ARPU by 10 per cent to Rs 107, which should then be partially offset by a 2 per cent ARPU owing to the return of inactive subscribers. The impact on the company's Ebitda, meanwhile, would be limited."  

It expects Vodafone Idea to witness 17.6 per cent YoY decline in revenue to Rs 9,690.5 crore while loss is pegged at Rs 6,309.4 crore for the quarter. Ebitda is seen declining 3.4 per cent YoY to Rs 4,232.5 crore and Ebitda margin is seen expanding 641 bps YoY to 43.7 per cent.

JM Financial

Analysts at JM Financial expect around 27 lakh subscriber losses for Vodafone Idea in Q4FY21, higher than the 20 lakh subscriber losses in Q3FY21, to account for the impact of the new Jiophone offer. However, they also expect around 40 lakh mobile broadband subscriber additions for the company, aided by industry tailwinds. In such a scenario, the brokerage sees Vodafone Idea reporting a decline of 12.2 per cent YoY to Rs 10,325.9 crore in revenue, with ARPU at Rs 115. Loss for the quarter is pegged at Rs 5,813.2 crore.

"The new IUC regime is expected to have an impact of Rs 80 crore on Ebitda, albeit reported Ebitda could increase 0.6 per cent QoQ to Rs 4,408.3 crore due to cost-saving initiatives. Ebitda margin is seen growing 543 bps YoY to 42.7 per cent," the brokerage said.