Broker’s call: Vodafone Idea (Sell)

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Target: ₹11

CMP: ₹15.79

Vodafone Idea reported mixed performance for the quarter. It reported revenue of ₹10,510 crore (down 0.9 per cent q-o-q, down 1.4 per cent y-o-y). The sequential decline in revenue was due to 2.5 million decline in subscriber base to 210.1 million; while ARPU was flat sequentially at ₹146.

The 4G addition was muted at 0.4 million q-o-q to 126.7 million. Average data usage was 15.6GB/month vs 15.4GB/month in Q4FY24. EBITDA margin was down 86 bps q-o-q to 40 per cent, led by higher network operating expenses during the quarter (up 1.2 per cent q-o-q). Net loss was down sequentially to ₹6,430 crore vs ₹7,670 crore in Q4FY24 on account of lower depreciation and interest expense.

Capex for the quarter was at ₹760 crore vs ₹550 crore in Q4FY24. Net debt was marginally down to ₹1,96,200 crore vs ₹2,07,400 crore, on account of fundraise during the quarter. After the successful FPO, it is in discussion with banks for debt fund raise of ₹25,000 crore. It has planned capex of ₹50,000-55,000 over next three years to strengthen its 4G network and launch 5G network across key sites.

It is expected that the customer churn should reduce significantly as a result of this planned capex programme. We have revised down our FY25/FY26 EBITDA by (3.9 per cent)/(1.4 per cent).