Vodafone Idea shares drop 5% on weak Q4 earnings

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MUMBAI :
Shares of Vodafone Idea declined as much as 4.90% on Wednesday after the company reported a consolidated net loss of 11,643.50 crore in Q4FY20, nearly three times higher than net loss of 4,881.90 crore in the fourth quarter of FY19.

At 2:45 pm, Vodafone Idea was trading at 10.22 down nearly 4% from its previous close, while the benchmark index, Sensex advanced 1.4% to 35,395.35 points.

Telecom operator’s consolidated revenue from operations fell 0.17% to 11,754.20 crore in Q4 FY20 versus 11,775 crore in Q4 FY19. Pre-tax loss stood at 11,742.60 crore in period under review against 6,758.90 crore in Q4 FY19.

Vodafone Idea’s subscriber base declined to 291 million in the fourth quarter ending 31 March from 304 million in Q3FY20. Subscriber churn remained stable in Q4 FY20 at 3.3%. Company’s average revenue per user (ARPU) for Q4 improved to 121, a 12 appreciation from 109 in Q3FY20, driven by the prepaid tariff hike effective from December 2019.

According to analysts at Angel Broking, “ARPU for March quarter improved to Rs.121 against Rs.109 in December quarter, due to prepaid tariff hike effective from Dec’19. Vodafone Idea’s ability to continue as a going concern is highly dependent on a positive outcome on AGR matter before the Supreme Court for the payment in installments. A favourable ruling, improvement in ARPU, reduction in loss of market share and any major investment by a big tech investor will be the key triggers for upside in the stock.”

On the adjusted gross revenue (AGR) matter, the department of telecommunications (DoT) has proposed to stagger the payment of 58,254 crore dues over 20 years. However, Vodafone Idea claims that 45,960 crore AGR dues are pending. The company wants a 20-year timeframe to pay these dues, that it claims now stand at 39,106 crore after it paid 6,854 crore during the March quarter. The Supreme Court will hear the matter next in the third week of July.

Analysts at Motilal Oswal in result review said “Vodafone Idea’s weak cash position with outstanding cash and equivalents of 2,660 crore in FY2020E and would be insufficient to service estimated cash requirement of 13,500 crore in FY2021/2022. It needs 50% big price hike to generate potential EBITDA of 25,000 crore to garner sustainable cash flows”. The brokerage has a under review on the stock, until a clarity on the company’s business continuity.

Commenting on the Q4 performance, Ravinder Takkar, the managing director (MD) and chief executive officer (CEO) of Vodafone Idea, has said that: “Our focus on rapid network integration, as well as 4G coverage and capacity expansion, has further improved customer experience. On the AGR matter, the next hearing is scheduled with the Honorable Supreme Court in the third week of July”.

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