Vodafone Idea likely to report marginal revenue growth in Q3; subscriber loss to continue: Analysts

BoFA Securities said that Vodafone idea is estimated to lose 4.5 million users in the third quarter.

Vodafone Idea is expected to report muted financial performance in the third quarter (Q3) that ended December 31 with up to 1 percent year-on-year (YoY) growth in revenue, analysts said, adding that subscriber losses will continue for the telco in the quarter.

Analysts, however, added that the telco’s average revenue per user (ARPU) would increase YoY in the quarter, led by increased prices for entry-level plans.

The cash-strapped telco is set to announce its Q3 results on Monday.
“...we expect ARPU to rise 2.5 percent QoQ to Rs 146 in 3Q FY24 compared to Rs 142 in 2Q FY24, aided by improving subscriber mix. Hence, we expect revenue to grow 1.4 percent QoQ to Rs 109 billion; EBITDA is also likely to grow 2.4 percent QoQ to Rs 44 billion,” JM Financial said in a note.

Analysts at JM Financial expect Vodafone Idea’s subscriber loss trend to continue, with the net subscriber base declining by ~2.5 million in Q3 FY24. The telco has been witnessing a decline of two to six million subscribers per quarter in the last few quarters due to the migration of subscribers to other telcos.

As per the Telecom Regulatory Authority of India's (TRAI) data, Vodafone Idea lost two million subscribers in October 2023.

“However, we expect ~1 million additions to the MBB subscriber base (while TRAI’s data suggest 0.8 million declines in Vodafone Idea's MBB subscribers on October 23),” said analysts at JM Financial.

ICICI Securities, in a separate note, said that it expects Vodafone Idea’s revenue to rise 0.1 percent QoQ to Rs 107 billion due to subscriber losses and ARPU to grow on the back of the rising penetration of unlimited plans in Q3 FY24E.

“We expect EBITDA to improve by 0.6 percent QoQ on operating leverage. Net loss is seen at Rs 78 billion," analysts at ICICI Securities said.

BoFA Securities said that Vodafone idea is estimated to lose 4.5 million users in the third quarter. “We expect implied ARPU to improve 1.5 percent QoQ, led by low-end tariff adjustments in a few circles, leading to a 1 percent year-on-year revenue increase. We model EBITDA margins to be largely flattish quarter-on-quarter at 39.9 percent,” the brokerage said in a note.

In the second quarter, Vodafone Idea participated in a government scheme that brought in a significant number of new subscribers, including 4G subscribers, Emkay said, adding that it expects Vodafone Idea’s subscriber loss to pick up again in Q3 at three million against 1.6 million loss in the previous quarter.

Analysts at Emkay said ARPU would increase by 0.6 percent sequentially to Rs 143, led by increased prices of entry-level plans. “Overall, revenue is likely to decline marginally by 0.4 percent QoQ. Margin will likely decline by 20 bps QoQ owing to a drop in revenue and higher marketing expenses,” they added.

Reliance Jio and Bharti Airtel continue to gain market share from Vodafone Idea, which is witnessing a sustained decline in subscribers and a delay in external funding.

Emkay said that Vodafone Idea’s weak financial condition is also impacting Indus Towers, despite the benefit from the 5G rollout by Bharti Airtel and Jio.

“For Indus, with payments coming from Vodafone Idea on time, we expect a steady 3Q. We estimate strong tower adds at 5K vs 5.9K in 2Q and the tenancy ratio to be 1.72X, leading to overall core revenues up to 5 percent QoQ. We model core EBITDA margin at 49.2 percent (flattish QoQ),” analysts at BoFA Securities said.

Analysts at JM Financial said that net tenancy additions for Indus Towers will remain robust, driven by Bharti Airtel’s aggressive rollout.

“We build in ~5.9k net tenancy additions in 3QFY24 for Indus Towers vs ~5.6k in 2QFY24; we expect substantial tower additions at ~6.2k, primarily driven by Bharti’s ongoing aggressive 5G rollout and rural expansion programme. However, we assume that rentals will be flat QoQ. Therefore, revenue is likely to increase 1.2 percent QoQ; EBITDA is also expected to rise 3.5 percent QoQ to INR 36bn in 3QFY24,” they added.