Analysts say that Vodafone Idea's (Vi) prospects of getting much-needed funding from investors are becoming less likely as the company continues to lose consumers. Data from the Telecom Regulatory Authority of India (TRAI) indicates that in November 2023, Vodafone Idea lost 1.7 million customers. Due to customer migration to other telcos, the telco has been seeing a decrease of two to six million subscribers per quarter for the past few quarters. As of December 31, 2023, Vodafone Idea had 215.2 million active users worldwide.
According to them, unless the company can come up with a strategy to focus on priority circles and protect its client base in order to dramatically raise its Average Revenue Per User (ARPU) and draw in investors, the lack of sufficient funding would also cause its customer base to continue shrinking in the future. Due to investors' continued skepticism about the company's capacity to stop the continuous client exodus, the corporation has reportedly missed multiple internal deadlines for obtaining finance from outside sources.
Vi announced a net loss of Rs 6,985.9 crore for the December quarter on Monday, January 29. This represents a 12.56 percent decrease from Rs 7,990 crore during the same period last year. Revenue during the third quarter of the preceding financial year was Rs 10,673.1 crore, an increase of 0.49 percent from Rs 10,621 crore.
With a shift in the entry-level plan and customer upgrades, Vodafone Idea's ARPU increased to Rs 145 in the third quarter, up 7.4% year over year from Rs 135 in the same period previous year. To effectively compete in the market, the company redesigned its offerings and put more of an emphasis on its execution.
A Case of the Chicken and the Egg
It's essentially a case of chicken and egg. Even on an existing 4G network, you cannot invest in 5G and network capital equipment to guarantee a high level of service until you have finance. You'll miss out on subscribers if you don't take those steps. It is a never-ending cycle. Ashwinder Sethi, a partner at Analysys Mason, told Moneycontrol that "someone will have to come in and go in good faith that they can turn around Vodafone Idea."
Potential investors are worried and uncertain about the turnaround, according to Sethi. Since strategic investors lost money in India, these are not strategic investors. Without a doubt, no international telecom operator wishes to visit India. Vodafone Idea is not able to be turned around; only financial investors are analysing it.
Urgent Requirement for Capital Expenditures
The third-ranked telco, according to Neil Shah, Vice President of Research at technology market research firm Counterpoint Research, needs financial infusion to build affordable Open RAN-based 5G networks that can, in theory, reduce some percentage of CAPEX and OPEX and serve as a negotiating chip against the more established, more costly equipment vendors.
According to Shah, Vodafone Idea is seeing an increase in subscriber attrition as its 2G user base transitions to 4G and its 4G user base matures to competitor 4G and 5G networks. Mahesh Uppal, Director of telecom consulting firm ComFirst (India), asserted that investors would be more motivated by Vodafone Idea's real revenues than by the company's subscriber count. "They [investors] are concerned that they are losing subscribers. But I think the company's revenues are a bigger concern for investors. Even though the company is losing subscribers, they still have a large number of premium users.
Further, as per Sethi, Vodafone Idea needs to hone its approach by concentrating on high-revenue areas and aiming for an increase in ARPU of up to Rs 250 in those areas over the course of the following several years. Sethi also cited, “Focusing on nine to ten circles with results will give confidence to investors."
Talks About Funding are Still Ongoing
On January 29, Vodafone Idea Limited's CEO, Akshaya Moondra, announced that the company was in talks with other parties to raise the necessary funds for network development, which included the introduction of 5G. According to an internal telecom department study, the financially stressed corporation notably failed to secure money from the US' International Development Finance Corporation (DFC) to use OpenRAN and related technologies for the 5G network.
Sunil Mittal, the chair of Bharti Enterprises, told Moneycontrol on January 17 at the World Economic Forum in Davos that Vodafone Idea requires "serious capital" to be in the market. Thus, they must strengthen their capital basis and make a large investment. They require more finance in addition to investors. It takes a lot of money to be in this business. And for the past two or three years, unhappily, that has not been the case. "I hope they succeed," Mittal remarked.
Vodafone Idea's primary customer, Indus Towers Ltd., disclosed on January 24 that the company's projected funding plans have not come to pass. In its notes to account, which are included in its financial statement, Towerco stated that "the funding plan of the said customer (Vodafone Idea) has not materialized till date and the said customer has not made the committed payments about the outstanding amount due as of December 31, 2022."
