Vodafone Idea is atelecommunications services provider
in India. The company provides voice, data, enterprise, and other value-added
services (Vas), including short messaging services and digital services across
2G, 3G and 4G technologies. The company offers connectivity services to
enterprise customers. It holds active licenses for national long distance
(NLD), international long distance (ILD) and internet service provider (ISP),
and registration for infrastructure provider (IP-1) services.
The company offers its services and products under the‘VI’
brand, backed by a strong brand recall of the Vodafone and Idea brands and
cumulatively more than three decades of operations.
The company is the third largest telecommunications services
provider in India based on subscriber base and the sixth largest cellular
operator globally in terms of number of subscribers in a single country of operations.
The company’s applicable gross revenue (ApGR) market
share was 17.79% of the Indian mobile telecommunications services industry in
Q3 FY2024. It had over 223.0 million subscribers and a subscriber market share
of 19.3%. Further, approximately 401 billion voice minutes and approximately
6,004 billion MB of data were carried on its network.
The company had an aggregate of 8,005.2 MHz of spectrum
holdings across different frequency bands end December 2023. Of this, 7,975.2
MHz spectrum is liberalized and can be used towards deployment of any
technology (2G, 3G, 4G or 5G). This includes the mid-band 5G spectrum (3300 MHz
band) in 17 priority service areas and mmWave 5G spectrum (26 GHz band) in 16
service areas. The company had approximately 183,400 unique tower locations and
over 438,900 broadband (3G and 4G) sites, with all its 4G sites enabled for the
provision of voice over LTE (VoLTE) services.
The company’s population coverage exceeded 1.2 billion
individuals, and its optical fibre cable spanned over 298,000 kilometres end
December 2024, combining both its own infrastructure and indefeasible rights of
use (IRU) taken (excluding overlaps). The mobile network reaches than
487,000 towns and villages in India, with broadband services in more than 342,200
towns and villages. Through its robust infrastructure, it carries out most of its
domestic and international outbound traffic on its own network for optimal
efficiency. Additionally, revenue is generated by partnering with other
telecommunication companies to carry incoming international traffic to India.
Vodafone Idea is an Aditya Birla Group and Vodafone Group
partnership. Together they held 48.75% stake in Vodafone Idea as on April 11,2024.
The Aditya Birla group is one of the largest business groups in India and a
leading global conglomerate with presence in 40 countries across diverse
sectors such as cement, metals and mining, mobile telecommunications, fashion
retail, financial services, textiles, carbon black, trading, chemicals,
renewables, paints, real estate, and jewelry retail. The Vodafone group is the
largest pan-European and African telecommunication’s company. It provides
mobile and fixed services to over 300 million customers in 17 countries and had
collaborations with mobile networks in 45 other countries as on 31 December
2023.
Object of the
offer
The IPO
consists of a fresh issue amounting to Rs 18,000 crore. There is no offer for
sale.
Out of the
proceeds from the fresh issue, Rs 12,750 crore will be utilized for purchase of
equipment for the expansion of the network infrastructure by setting up new 4G
sites, expanding the capacity of existing 4G sites and new 4G sites, and
setting up new 5G sites; Rs 2175.3 crore will be utilized for payment of
certain deferred payments for spectrum to the Department of Telecommunication
and the GST; and the balance for general corporate purpose.
Strengths
The company is the third largest telecommunications services
provider in India based on subscriber base. It had over 223.0 million
subscribers, with subscriber market share of 19.3% end December 2023. Its ApGR
market share was 17.79% of the Indian mobile telecommunications services
industry in Q3 FY 2024. The company had a leading applicable gross revenue
market share in the Kerala and Mumbai service areas and the second largest
market share in the Gujarat and Kolkata service areas in Q3 FY 2024. Themarket
share was over 20% in the Maharashtra, Delhi, Uttar Pradesh (West) and Haryana
service areas in Q4 FY 2024.
The company has a large spectrum portfolio with 8,005.2 MHz
of spectrum holdings across different frequency bands of which 7,975.2 MHz
spectrum is liberalized and can be used towards deployment of any technology
(2G, 3G, 4G or 5G). This includes the mid band 5G spectrum (3300 MHz band) in
17 priority service areas and mmWave 5G spectrum (26 GHz band) in 16 service
areas. The large spectrum portfolio enables a superior experience to its
customers as it has the highest 4G spectrum available per million subscribers
and sufficient capability to support migration of its entire 4G subscriber base
to 5G. The emergence of 5G technology
will support strengthening of the enterprise offerings and provide new
opportunities for business growth.
The
company’s existing network is built on 5G-ready architecture. Its 4G network has been strategically
deployed with a future-proof architecture. All the new basebands and over 90%
of the time division duplex (TDD) 2500 MHz band radio units are 5G-ready,
with 10G bandwidth capabilities. Various advanced 5G technologies have been
deployed. These include massive multiple-input multiple-output (Massive MIMO)
for improved capacity and open radio access network (ORAN) for increased
flexibility. There were 74,800 TDD
radios, 13,900 Massive MIMO sites, and 13,000 small cells as of 31 December
2023. Moreover, the company completed the minimum rollout obligations in four
service areas of Maharashtra, Delhi, Tamil Nadu, and Punjab, by collaborating
with original equipment manufacturers (OEMs). The network includes new
unified roadmap architectures of virtualized radio access network (vRAN)
and ORAN solutions. The E-band technology is being promoted as a viable
alternative. The pan-India core network is also fully equipped to support 5G
non-standalone (NSA) technology.
The company has a large enterprise customer base, with long
standing relationship and a diversified portfolio of business services. The
customers include global enterprises, corporates, SMEs, government
organizations, small-offices, and home-offices, and start-ups. A dedicated team
of account and service managers addresses the enterprise mobility, fixed line,
IoT, cloud and converged communications requirements of the enterprise
customers. According to Frost & Sullivan’s ‘Enterprise Mobile Services
Quarterly Tracker’ Report, September 2023 (F&S September 2023 Report),
the enterprise mobility market share of the company was 29.9% in the six months
ended 30 September 2023. The IoT services revenue market share was 30.3%.
The company has an extensive distribution and service network
comprising over 10,000 distributors servicing approximately 787,000 retailers
across India as of 31 December 2023. Further, there were 2,300 branded urban
stores in India, including own stores and franchisee-owned stores covering over
95% of the districts in India.
‘VI’ is one of the trusted brands with a strong proposition.
The `VI’ brand has completed over three years, achieving recognition and recall
in the Indian telecommunications market.
The company has been backed by strong promoter groups:the Aditya
Birla group and the Vodafone group.
Weaknesses
Providing
telecommunications or related services that are technologically up-to-date and
keeping up with changing consumer preferences are essential for the company to
remain competitive.
Requires
significant capital to fund capital expenditure and working capital
requirements.
Has incurred
significant indebtedness and has not complied with certain covenants under its
financing agreements. Inability to meet obligations, including financial and other
covenants, under thedebt financing arrangements could adversely affect the
financial condition. The total gross debt (excluding lease liabilities and
including interest accrued but not due) stood at Rs 2,03,425.7 crore,
comprising deferred spectrum payment obligations of Rs 195276.2 crore as on
December 31, 2023.
The company
had planned raising of funds from the promoters/FIIs and long-term debt from
lenders for capex related to the 4G expansion and roll-out of 5G services, in a
bid to arrest the declining subscriber base and augment it further. However,
there has been delay in fructification of the same beyond the envisaged
timelines which has led to cash flow mismatches.
Vodafone Idea was market leader in 2018 with market share of
36.55% and was the leading player in the sector, however the same has declined
to 19.3% as on December 31,2023. Further, due to deteriorating financial
condition and inability to raise funds, the company has failed to gain market
share through expansion of 4G services and timely rollout of 5G services.
Telecommunication licenses and spectrum allocations are
subject to terms and conditions, ongoing review, and varying interpretations,
each of which may result in modification, suspension, early termination, expiry
on completion of the term or additional payments.
Non-payment of large dues to its vendors, especially tower
vendors and equipment suppliers, could have an adverse effect on the business
and operations. As of 31 December 2023, the trade payable aggregated to Rs 13807.8
crore, with capital expenditure aggregating Rs 6926.2 crore and lease
liabilities aggregating Rs 36712.1 crore.
Competition in the Indian telecommunications industry is
intense. Primary competitors are other telecommunication companies such as
Bharti Airtel, Reliance Jio Infocomm, Bharat Sanchar Nigam, and Mahanagar
Telephone Nigam. Competition from providers of new telecommunication services is
due to technological developments and the convergence of various
telecommunication services. Due to intense competition the company has been not
able to raise tariffs as it has become a price taker due to market share loss
and Jio’s dominance and dictating the market trends and tariffs.
There are outstanding legal proceedings against the promoters
and the company amounting to Rs 61508.5 crore and Rs 127614 crore,
respectively. Any adverse outcome may affect the financial condition.
Revenue may be adversely affected if business from the
service areas of Maharashtra, Gujarat, and Mumbai or from the other priority
service areas declines.
Losses were incurred during recent periods. Therefore, achieving
or sustaining profitability in future is doubtful. Loss after tax was Rs
23563.8 crore in the nine months ended31 December 2023, Rs 23187.0 crore in the nine
months ended December 2022, Rs 29301.1crore in FY 2023,Rs 28245.4crore in FY
2022, and Rs 44233.1crore in FY 2021. The networth was negative and stood at Rs
-97931.9 crore.
The audit and review reports of the statutory auditors
contain a paragraph on material uncertainty relating to going concern. There
can be no assurance that any similar observations or remarks will not form part
of the financial statements, or that such remarks will not affect the financial
condition.
Any further downgrade in the credit ratings could increase the borrowing
costs, affect the ability to obtain financing, and adversely affect the financial
condition.
Contingent liabilities were Rs 19021.7 crore as on 31 December
2023.
Valuation
Sales were up by 1.1% to Rs 32044.90 crore in the nine months
ended December 2023 over a year ago. The OPM increased 7 bps to 39.91%, leading
to a 1.5% increase in OP to Rs 12790.2 crore. OI decreased 62.9% to Rs 80.7
crore. Interest cost increased 4.8% to Rs 19485.2 crore.However,depreciation
and amortization cost declined 2.7% to Rs 16882.2 crore. Loss before tax increased
1.7% to Rs 22743.9 crore. Tax expenses decreased 1.2% to Rs 819.9 crore. Net loss
widened 1.6% to 23563.8 crore as against net loss of 23187.0 crore in the
corresponding period of the previous year.
Sales were up by 9.5% to Rs 42177.2 crore in FY 2023. The OPM declined 177 bps to 39.87%, leading
to a 4.9% increase in OP to Rs 16817.0 crore. OI increased 140.6% to Rs 311.3
crore. Also,interest cost rose11.3% to Rs 23354.3 crore. Depreciation declined
2.3% to Rs 23049.7 crore. Loss before tax inclined 3.8% to Rs 29297.6. Tax
expenses were lower by 69% to Rs 3.5 crore. Net loss stood at Rs 29301 crore as
against net loss of Rs 28245.4 crore in FY2022.
On 24 March 2024, the company issued 1,44,00,00,000 equity
shares to ATC Telecom at a face value of Rs 10 to raise a total sum of Rs 1440
crore. Further, on 06 April 2024, the board approved the issuance of up to
1,39,54,27,034 equity shares at an issue price of Rs 14.87 per equity share,
aggregating to Rs 2075.0 crore, to one of the entities forming part of the
company’s promoter group, Oriana Investments Pte Ltd, on a preferential basis.
The shareholders’ approval is pending.
As the company is making losses, the P/E ratio cannot be
calculated. There are strong hopes that the telecom tariffs will be hiked after
Lok Sabha elections as such the company might return to profitability in the future.
At the higher price band of Rs 11, the offer is made at
around 19.15 times post-IPO EV/TTM EBITDA and 7.64 times EV /TTM sales. In
comparison listed peer Bharti Airtel trades at 11.6 times its EV/TTM EBITDA and
EV/ TTM Sales of 6.06 times. Bharti Airtel is making profits in the last 2
years.
Vodafone Idea: Issue Highlights
|
Fresh
issue (in Rs crore)
|
18000
|
Offer
for sale (in Rs crore)
|
-
|
Price
Band (Rs)
|
10-11
|
Pre
issued capital (Rs crore)
|
50119.8
|
Post
issue capital (Rs crore)
|
|
-
in Upper price band
|
68119.8
|
-
in Lower price band
|
68119.8
|
Pre
issue promoter and Promoter Group shareholding (%)
|
48.91%
|
Post
issue Promoter and Promoter Group shareholding
|
|
-On
higher price band (%)
|
36.87%
|
-On
lower price band (%)
|
36.87%
|
Bid
Size (in No. of shares)
|
1298
|
Issue
open date
|
18/04/2024
|
Issue
closed date
|
22/04/2024
|
Listing
|
NSE,BSE
|
Rating
|
35/100
|
Vodafone
Idea : Standalone Financial
|
|
2103 (12)
|
2203 (12)
|
2303 (12)
|
2212 (9)
|
2312 (9)
|
Sales
|
41952.20
|
38515.50
|
42177.20
|
31645.30
|
32044.90
|
OPM (%)
|
40.39
|
41.64
|
39.87
|
39.84
|
39.91
|
OP
|
16945.70
|
16036.10
|
16817.00
|
12606.70
|
12790.20
|
Other inc.
|
174.20
|
129.40
|
311.30
|
217.50
|
80.70
|
PBIDT
|
17119.90
|
16165.50
|
17128.30
|
12824.20
|
12870.90
|
Interest
|
17998.10
|
20980.80
|
23354.30
|
18591.00
|
19485.20
|
PBDT
|
-878.20
|
-4815.30
|
-6226.00
|
-5766.80
|
-6614.30
|
Dep.
|
23638.50
|
23584.30
|
23049.70
|
17346.00
|
16882.20
|
PBT
|
-24516.70
|
-28399.60
|
-29275.70
|
-23112.80
|
-23496.50
|
Share of profit/loss from JV
|
231.40
|
1.20
|
0.50
|
0.50
|
-2.90
|
PBT Befor EO
|
-24285.30
|
-28398.40
|
-29275.20
|
-23112.30
|
-23499.40
|
Execptional items
|
-19968.10
|
164.30
|
-22.40
|
755.50
|
755.50
|
PBT After EO
|
-44253.40
|
-28234.10
|
-29297.60
|
-22356.80
|
-22743.90
|
Total Tax
|
-20.30
|
11.30
|
3.50
|
830.20
|
819.90
|
PAT
|
-44233.10
|
-28245.40
|
-29301.10
|
-23187.00
|
-23563.80
|
Minority Interest
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
Net Profit
|
-44233.10
|
-28245.40
|
-29301.10
|
-23187.00
|
-23563.80
|
EPS (Rs)*
|
-3.7
|
-4.3
|
-4.4
|
#
|
#
|
EPS is on post issue equity
capital of Rs 68119 crore of face value of Rs 10 each
|
Figures in Rs crore
|
# EPS is not annualized
|
Source: Vodafone Idea Issue
prospectus
|
|