Vodafone Idea Q3 Results: Greater-Than-Expected Loss, Margin Contracts

Vodafone Idea Ltd. reported greater-than-expected loss in the quarter ended December amid concerns about the telecom operator’s ability to remain in business.

The telecom operator’s net loss stood at Rs 6,438.8 crore compared with a loss of Rs 50,922 crore in the three months ended September, according to an exchange filing. A consensus of analyst estimates compiled by BloombergQuint had pegged the loss at Rs 4,620 crore. The carrier had posted India’s largest-ever quarterly loss in the second quarter as it provided for Rs 25,678 crore as dues pending to the government related to the 14-year-old adjusted gross revenue court dispute.

The existing material uncertainty on account of pending liabilities casts a significant doubt on its ability to “continue as a going concern”, Vodafone Idea said in a media statement.

The carrier’s revenue rose 2.3 percent sequentially to Rs 11,089.40 crore in the October-December period, compared with the Rs 11,058-crore forecast. That came as Vodafone Idea, along with peers, increased tariffs by an average of 30 percent in December to improve financial health.

The company, according to Edelweiss, however, lost more than 5 million subscribers during the quarter, primarily due to migration of feature phone subscribers to Reliance Jio Infocomm Ltd. on the back of JioPhone sales. Still, its average revenue per user rose to the highest in at least six quarters at Rs 109 compared with Rs 107 in the preceding three months.

• Operating profit rose 0.7 percent to Rs 3,420.50 crore.
• Operating margin contracted 50 basis points to 30.8 percent.

India’s telecom operators are bruised by free calls and cheap data onslaught of Reliance Jio. Asia’s richest man Mukesh Ambani’s carrier drove smaller players out and forced Vodafone India and Idea Cellular Ltd. to merge. That didn’t help as the combined entity kept losing users, reported losses and accumulated a huge debt. And the Supreme Court’s October ruling that carriers will have to include non-core revenue to calculate levies dealt another blow.

Vodafone Idea’s peer Bharti Airtel Ltd., too, reported a bigger-than-expected loss in the quarter ended December. The carriers together owe more than Rs 88,000 crore in pending AGR dues to the Department of Telecommunications.

Kumar Mangalam Birla, chairman and co-promoter of Vodafone Idea, in December had said the company would shut shop if the government doesn’t provide relief on the liability it faces on past statutory dues after the apex court’s ruling.

Last month, while the Supreme Court dismissed the petitions of telecom operators seeking a review of the definition of AGR, it agreed to hear their plea seeking more time to negotiate the terms of payment of the back-fees to the government. The Supreme Court will hear the applications on Feb. 14.

Other Highlights

• Vodafone Idea’s subscriber base fell to 304 million from 311 million in the quarter ended September.
• The company expects tariff hikes to aid its revenue in the future.

Shares of Vodafone Idea remained flat at close, before the results were announced. That compares with a 0.22 percent drop in the benchmark Nifty 50 Index.