Lower 4G additions hit Vodafone Idea revenues

Country's largest telecom player Vodafone Idea continues to lag peers on revenue growth, mainly because of lower 4G additions and a higher customer loss to Reliance Jio in the fourth quarter.

Vodafone Idea continues to lag peers on revenue growth, especially Bharti Airtel, which recorded a 4% growth. "Vodafone Idea 's lower growth is a reflection of – lower 4G adds – 5.4 million subscribers in the fourth quarter versus a forecast of 9.7 million....and higher customer loss to Jio – likely over 15 million subscribers in the fourth quarter," JM Financial said in an analyst report.

Reliance Jio recorded revenue growth of 7%.

The company needs to expand its 4G coverage quickly to boost 4G subscriber additions, the report said. Its 4G population coverage increased marginally to 65% as of March 2019, from 64% in December 2018.

4G net additions slowed down to 5.4 million in Q4 versus 9.5 million in Q3, and 8.4 million in Q2, despite an increase in 4G population coverage, analysts at JM Financial said.

Vodafone India and Idea Cellular merged their operations after aggressive competition unleashed by new player Reliance Jio created disruption in the telecom market. The company is still in the process of synergising their operations as the merger got operational in August 2018.

Another report by Ambit Insights said the company seems to be bearing steep costs as a result of the synergy realisation initiative, which is reflected in muted revenue and disappointing 4G additions in the fourth quarter.

"This is in line with our thesis that network optimisation for synergy realisations would adversely impact revenue. Network glitches would result in high Arpu (average revenue per user) subscribers switching out. It remains uncertain as to whether the rights issue would not be needed again, potentially causing equity dilution," the report said.

On Monday, the company reported a narrowed down loss of Rs 4,881.9 crore in the fourth quarter, from Rs 5,004.6 crore in the December quarter.

During the quarter, it reported a loss of 53.1 million subscribers due to implementation of minimum Arpu plans, which also helped in improving Arpu to Rs 104 in the fourth quarter versus Rs 89 in Q3. Due to synergy realisations, Vodafone Idea's earnings before interest, taxes, depreciation and amortisation (Ebitda) from wireless operations improved 57% quarter on quarter to Rs 1,785.3 crore in the March quarter from Rs 1,136.8 crore in the December quarter.

Deutsche Bank in a report said there is robust progress on merger cost savings and network integration. Operating expenses have gone down and the merger synergies are annualising at Rs 5,100 crore, which compares with total guided opex synergies of Rs 8,400 crore to be achieved by end of fiscal 2021.

ACHILLES HEEL

• 4G net additions slowed down to 5.4 million in Q4 versus 9.5 million in Q3, and 8.4 million in Q2, despite an increase in 4G population coverage
   
• The company needs to expand its 4G coverage quickly to boost 4G subscriber additions, JM Financial said