Vodafone Idea's Struggle: Should Investors Hold Or Exit?
Vodafone Idea's subscriber count has fallen to 205 million in Q2 FY25, from 225.9 million in Q4 FY23. Despite investments in 4G, tariff hikes, and network expansion, the company continues to struggle.
Investors of Vodafone Idea Ltd. are losing money at a faster pace than the telecom operator is losing subscribers. The company's subscriber count has fallen from 225.9 million in the fourth quarter of fiscal 2023 to 205 million in the second quarter of fiscal 2025.
Why Is Vodafone Losing Subscribers?
Vodafone Idea continues to lose subscribers despite the investments it is making in 4G capacity and expanding coverage. The tariff hikes taken in June, along with dual SIM consolidation, customers upgrading to 4G/5G mobile handsets and weak network coverage on outskirts, has added to the woes and subscriber loss.
Highest AGR Dues Versus Peers
Vodafone's AGR dues stand at Rs 70,300 crore, against a cash balance of Rs 13,620 crore. In comparison, peers Bharti Airtel Ltd.'s dues stand at approximately Rs 44,000 crore and Reliance Jio's are next to nil.
Will Vodafone Idea Be Able To Service Its Debt?
With the delay in its debt-funding plan, the management is highly relying on getting relief from the government to convert a major portion of their statutory dues into equity. However, all said and done, this comes across as a big gamble that the company management is taking, as the Indian government has not committed to the conversion yet.
The big question is, what happens if the government does not come to the rescue?
"In terms of our cash flows, what we have assumed is that in the second half of FY26 post the moratorium and in FY27, which is also the first full year after the moratorium, about Rs 290 billion of the deferred series of installments, which will fall post the moratorium, they will be converted to equity. I believe these are the two most relevant assumptions which I can share with you. And then of course there is a lot of operational modeling which happens, which everybody can do. But these are two inherent assumptions which will probably help you to model anything that you are planning to do."Akshaya Moondra, CEO, Vodafone Idea
Vi Capex Lags Peers
Vodafone Idea's capex lags that of peers. The company's second quarter capex increased to Rs 14 billion from around Rs 8 billion in the first quarter of fiscal 2025. This compares to Bharti Airtel’s 1H FY25 India capex at ~Rs 130 billion and Jio’s cash capex of around Rs 200 billion.
What Happened To Investor Wealth?
Investors have lost 78% in last six months, and the ones who had bought the stock earlier have lost over 60% in last one year.
Should Investors Hang Up On Vi?
"A lot needs to fall in place for VIL to become an investible idea for us," Nuvama has said, while maintaining a 'hold' rating.
Investor focus will now shift to VIL’s progress on key operational parameters—pace of subscriber loss, future tariff hikes and capex velocity—even as further developments on AGR dues will also be keenly watched, the research firm said.
Nomura has cut Ebitda estimates by 3% for fiscal 2026 and 2027. They are factoring a lower subscriber base. The outlook for VIL remains hinged on it closing its debt raise soon, which is critically essential for VIL to be able to invest in networks and potentially return to a modest subscriber growth path.
The brokerage retained 'buy', with a revised target price of Rs 14 from Rs 15.
