Q1 Results: Vodafone Idea’s Core Operating Profit Turns Negative
Revenue declined, led by a fall in subscriber base and higher costs.
Vodafone Idea Ltd.’s core operating profit turned negative in the quarter ended June as revenue declined and costs rose amid an unabated tariff war in India’s telecom market.
Vodafone Plc. and Kumar Mangalam Birla-controlled telecom operator’s reported Ebitda doubled from the previous quarter to Rs 3,650 crore, according to its exchange filing. Nearly Rs 2,400 crore of it came on account of adoption of IND AS 116 accounting standard and Rs 1,480 crore was a result of merger synergies. Adjusted for these gains, the core operational profit turned negative in the first quarter.
Revenue declined, led by a fall in subscriber base and higher costs.
Vodafone Idea, born out of a consolidation in India’s telecom market driven by Mukesh Ambani’s Reliance Jio Infocomm Ltd., continues to battle a pricing war. Moreover, the company now charges a minimum monthly amount from users, forcing them to opt for higher-priced packs. That drove down its subscriber base. While it aided the company’s average revenue per user, the fall was so steep that it failed to lift the overall revenue.
The telecom operator’s 4G subscriber base increased to 8.5 crore, but the pace of addition was the slowest in at least 12 months. Fourth-generation users are customers who predominantly use data are high revenue-generators.
Adoption of Ind AS 116 standard lowered the company’s loss by Rs 120 crore. The operator reported exceptional losses worth Rs 807 crore related to integration, merger costs, provision for depreciation and impairment of assets. The merged entity shut down its payments bank during the quarter, resulting in an impairment of Rs 210 crore.
As a result, Vodafone Idea’s net loss in the first quarter—adjusted for Ind AS 116—widened to Rs 4,994 crore against a net loss of Rs 4,882 crore in the previous quarter.
Other Highlights (QoQ)
- Revenue fell 4.3 percent to Rs 11,270 crore vs Rs 11,775 crore. Analysts’ estimate was Rs 11,741 crore.
- Average revenue per user rose 3.9 percent to Rs 108 vs Rs 104 against the estimate of Rs 112.
- Churn ratio improved to 3.7 percent vs 7.2 percent.
- Company achieved 70 percent of synergy target.
- Capex stood at Rs 2,840 crore; capex for FY20 will be Rs 16,800 crore.
- Net debt reduced by only Rs 19,130 crore to Rs 99,260 crore despite fund raise of Rs 25,000 crore.