What is the way forward for Vodafone Idea?

Vodafone Idea: The telecommunications industry is an essential component of modern civilization, connecting individuals and businesses around the world. It has developed strongly during the transition from traditional landlines to mobile networks, the Internet and now 5G. This industry has transformed communications by facilitating seamless data transfer and fostering global connectivity. In this article, you can find out about Vodafone Idea Limited’s finances, merger, and the company’s future plans.

Industry Overview of Vodafone Idea

India is currently the world’s fifth-largest economy and is expected to become the third-largest economy by 2028. In the Indian telecom sector, ARPU will be $2.08 per month. India has 866 million broadband subscribers and 38 million fixed-line subscribers on wireless networks. It will be 23 times more than wired subscribers. In India, 4G wireless penetration will be 57% of the population, smartphone adoption will be 62%, and 4G/5G wireless penetration will be 66%.

The Indian market is rapidly undergoing a digital revolution with 1.4 billion people in the world’s largest unique ID program with mobile authentication, over 1 billion active wireless subscribers, and 43.1% rural internet penetration in September 2020. The CAGR in sales growth in the telecom sector will be 5.92% over the past 10 years.

Company Overview of Vodafone Idea

Vodafone India Limited (VIL) Established on August 31, 2018. It is one of the mobile network providers in India. Vodafone Idea is India’s third largest mobile service provider offering voice, internet, enterprise and value-added services. VIL offers an operating network in 16 countries and a partner network in 44 countries. It was a partnership with Aditya Birla Grop and Vodafone Group Plc.

VI provides a network of equipment of 2G, 3G and 4G types with 1,83,800 locations and over 4,30,700 broadband sites (3G+4G+5G). In 2016, Reliance Jio started dominating the market by offering free services to its customers. So, in 2018, Vodafone India and Idea Cellular merged to become India’s largest telecom operator. Vodafone and Idea Limited are expected to hold 19.3% market share in December 2023.

Vodafone Idea merger

The Vodafone Idea Limited merger commenced in March 2017 and was completed on August 31, 2018. The reason for the merger is that it will hinder Reliance Jio’s entry into the market. started a price war. telecommunication industry. The merger was aimed at improving the company’s market position against Jio and Airtel.

Vodafone Idea has a market share of only 19.3%. The merger will help maximize VIL’s subscriber base and improve the company’s debt position. It will also help reduce operating costs, and synergies and spectrum will impact the company’s future growth.

Segment Analysis of Vodafone Idea

Vodafone Idea Limited has over 215 million subscribers in Q3 2024. Vodafone Idea has an extensive network comprising 8,005 MHz spectrum holdings, over 183,400 unique locations, over 4,38,900 broadband sites and over 2,98,000 km of OFCs. The company has expanded its coverage to over 4,87,000 cities and towns.

Vodafone Idea has expanded its 4G coverage to over 1.2 billion people with daily data capacity reaching 82 PB as of December 2023. There are 17 priority circles that account for over 98% of revenue (over 92% of industry revenue). Over the past eight years, the company has grown its blended mobile ARPU at a CAGR of 3.1%, average wireless data subscribers at a CAGR of 106.9%, and voice minutes per subscriber at a CAGR of 14.2%.

Vodafone Idea’s spectrum

Vodafone Idea Limited holds the 4G non-5G spectrum on 1775.2 MHz and will have 215.2 million subscribers. The company has the highest 4G spectrum per million subscribers (8.25) compared to Airtel (6.22) and Jio (4.02). It is expected to drive short-term growth by supporting the transition of all 4G subphones to 5G.

The company offers 850 MHz of 5G spectrum and has 125.2 million 5G subscribers. 5G spectrum per million 4G subscribers is 6.77. The company’s spectrum excluding millimeter wave per million subscribers is 12.20. In terms of 5G frequency and number of frequencies per million subscribers, it is the second highest after Airtel.

In the third quarter of fiscal 2024, the company had 215 million total subscribers. It decreased by 2.27% compared to the previous quarter. However, the company’s 4G subscriber base increased from 125 million in Q2 to 126 million in Q3 FY24.

The company’s average revenue per subscriber increased from Rs. 142 to Rs. In the third quarter of 2024, it will be 145. The company renewed a total of 12 MHz spectrum in 1800 MHz and 900 MHz bands in the two circles, spending Rs. 150 billion.

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Vodafone Idea’s finances

Vodafone Idea Limited’s finance segment revenue grew by 9.51% from ₹38,515 Cr in FY22 to ₹42,177 Cr in FY23. Vodafone Idea has recorded a revenue growth rate of 3.26% CAGR over the last four years.

VIL’s net loss increased from ₹28,245 in FY22 to ₹29,301 in FY23. This is because costs such as manufacturing costs, labor costs, and other company costs increased by 12.82%.

The operating profit margin and net profit margin were 40.26% and -68.96%, respectively, and operating profit was affected by corporate spending, recording a negative profit margin over the past five years.

EPS is negative because the company is not making a net profit. In FY23, EPS will be -8.43%. The debt ratio in FY24 was negative (-1.99). It indicates that the company’s liabilities will be more than the company’s assets. ROE will be 0% and ROCE will be -4.12%.

tariff increase

The telecommunications industry plans to increase tariff rates by 15-20% once the election results are announced. This is expected to be of great help in increasing the company’s sales. Average revenue per user (ARPU) increases a company’s revenue. It will also improve 4G upgrades and higher data plans and postpaid service upgrades. This will help Vodafone Idea Limited cover its net profit in the coming years.

Future plans/merger advantages

• Vodafone Idea plans to invest in Pan India’s 4G population coverage for future Capex expected to reach $500-550 billion over the next three years.
• Vodafone Idea plans to use the investment to expand 4G convergence, roll out 5G and some of the investment will be used for corporate business.
• VIL raised $180 billion through FPOs in FY24. It was one of the largest in India and had a subscriber base of 7 times.
• VIL plans to increase its annual average per user from Rs.142 in Q2 to Rs.145 in Q3 FY24.
• VIL continued to grow its 4G subscribers from 125 million to 126 million in the third quarter of FY24.
• The company’s internal cash generation is primarily used to pay off supplier dues and existing debt.
• Vodafone Idea promoted VI apps for gaming, bill payment, shopping, food, travel and entertainment to integrated users.

• The company is focused on network investments to drive coverage and capacity expansion, as well as business services ranging from carriers to techno-innovation.
• VIL helps you monetize digital opportunities by advancing market initiatives to drive improved ARPU, customer retention, and strategic collaboration.
• We have supported service improvement through the digitalization of distribution and customer service.

Vodafone Idea’s financial indicators

Key indicators for Vodafone Idea are:

conclusion

In conclusion, Vodafone Idea is one of the largest telecom operators in India and the company is planning to invest in it. capital expenditure For 4G expansion and rollout of 5G services, VIL also plans to improve 4G usage to reduce subscriber loss due to competitive advantage in the telecom sector.

The company believes that investments will be renewed and competition in the industry will increase and the company’s future plans include improving its services and increasing its market share to position itself as a major player in the Indian telecom sector.

Written by Nikhil Naik

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