Cash-strapped Vi is now more dependent on govt relief

Limited visibility around tariff hike and lack of clarity on new funding could make Vodafone Idea "more dependent" on any form of government relief for improvement of its fundamentals, BofA Securities has said in its latest report.

The top brass of cash-strapped telco Vodafone Idea had last week said 'floor price' remains the "best and most preferred" fix for industry's woes arising from tariff-related issues.

The company, whose fundraising plans have been significantly delayed, had further said it is in active talks with potential investors, and emphasised that there is no reason to start working on an alternate 'Plan B'.

In a report on Vodafone Idea, BofA Securities said, "With limited visibility on tariff hike and lack of clarity on potential new funding, we believe VIL will be more dependent on any govt relief for improvement in its fundamentals."

These include potential floor pricing, and an extra one-year moratorium on spectrum payment for 2022.

Summing up the key takeways, the BofA Securities' report observed a big issue in the sector is that consumption is high but pricing is low.

VIL's management believes this can be fixed by floor pricing pending government approvals, and change in the architecture of current plans.

New plans introduced by Voda Idea offer a bucket of data for a particular period, which should help in average revenue per user (ARPU) hike, the report said.

JM Financial, in its note on VIL, said the compay's survivability is contingent on industry wide tariff hike, and termed the telco's Q4FY21 performance a "mixed bag".

"...subscriber base continued to be relatively stable, with subscriber losses contained at 2 million for the quarter (similar to 3QFY21), with addition of 4.2 million 4G subscribers QoQ (quarter on quarter).

"However, ARPUs came in at Rs 107...due to higher than anticipated IUC (interconnect usage charges) revenue loss," it said.

VIL has to pay Rs 24,000-25,000 crore of debt over March to April 2022, the JM Financial report said adding that "it looks increasingly likely that the government might have to step in to ensure survivability of the company".

JM Financial's analysis further said there continues to be limited visibility on tariff hike in near term given Jio's aggressive focus on subscriber additions.

"Hence, this continues to delay its fund raising plans posing near-term liquidity constraints," it said.

While stabilising customer base is a small positive, viability continues to hinge on ability to raise capital and moving fast to improve network gaps, Ambit said in its report.

Vodafone Idea Ltd (VIL) has approached the government seeking one-year moratorium for payment of spectrum instalment of over Rs 8200 crore, that is due in April 2022.

The company has said that the sector's biggest pain point comes from pricing issues, and conceded that tariff hike is "absolutely" essential to revive the sector, which is under stress.

Vodafone Idea had last week reported narrowing of consolidated loss to about Rs 7,023 crore for the quarter ended March 2021, mainly on the strength of cost optimisation.

Vodafone Idea had posted a loss of Rs 11,643.5 crore in the same period a year ago.

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