While the increase in tariffs will help Vodafone Idea to increase its cash flows, the operator will need fresh fund infusion if it wants to stay competitive, according to analysts.
“In order to stabilise earnings, VIL needs large funding to significantly accelerate its current network investment of ₹5,000 crore, which is much lower than Bharti/RJio’s ₹15,000-20,000 crore annual India capex, despite its far deeper 4G network. Vodafone Idea also has repayments of ₹6,400 crore due over Dec’21 to Mar’22,” said research analyst at Motilal Oswal.
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VIL’s ARPU, which stands at a ₹109 (40 per cent below Bharti), given the higher proportion of customers on lower base plans, could see a big push, provided it doesn’t see a huge market share loss. This hike, catering to 70 per cent of its revenue pool, can potentially offer an incremental EBITDA of ₹3,800 crore (2QFY22 annualised), that is a 68 per cent jump v/s 13 per cent for Bharti.
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“VIL’s cash flow crunch will get addressed provided the current subscriber churn is arrested, with ₹8,000-10,000 crore of estimated annual capex and interest expense. It needs immediate funding for ₹6,400 crore of NCD repayments due between Dec’21 and Mar’22,” Motilal Oswal said in the report.
