Vodafone Idea Shares Plummet Amid Financial Uncertainty

Vodafone Idea shares plunged over 15% on July 1, reaching ₹8.50 at 9:23 a.m., as the telecom operator, backed by the Aditya Birla Group, grappled with operational challenges exacerbated by its failure to secure funds in the March quarter.

Financial Struggles and Concerns

The company’s inability to raise funds and address mounting debt emerged as significant hurdles, casting doubt on its future trajectory. Vodafone Idea reported a net loss of ₹7,022 crore in the March quarter, with a staggering net debt of ₹1.7 lakh crore. Its financial performance has hindered its cash flow generation, impeding its ability to meet liabilities and guarantees, thereby raising substantial uncertainty about its continuity as a going concern.

Decline in Average Revenue per User (ARPU)

Notably, Vodafone Idea witnessed a substantial decline in average revenue per user (ARPU), plummeting to ₹107 in the January-March quarter, marking a nearly 12% drop from the preceding quarter. Analysts had anticipated losses to narrow and ARPU to decrease following the end of the interconnect usage charges (IUC) regime.

Revenue Decline and Subscriber Base

The company’s gross revenue also contracted to ₹9,607 crore in the March quarter, down from ₹10,894 crore in the December quarter, attributed to the removal of IUC. However, despite these challenges, Vodafone Idea experienced a marginal uptick in its 4G subscriber base, reaching 11.39 crore compared to 10.97 crore in the preceding quarter.

EBITDA Performance and Voice Quality

On a positive note, the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to ₹4,408 crore in the March quarter, representing a nearly 3% increase from the previous quarter. The EBITDA margin also improved to 45.9% from 39.3% in the December quarter.

According to the Telecom Regulatory Authority of India (TRAI), Vodafone Idea maintained the best voice quality in the country for six consecutive months between November 2020 and April 2021. Despite these achievements, the company faces formidable financial challenges that continue to weigh on its performance and outlook.