Vi is Still Losing Subscribers - Albeit at a Slower Pace

Vodafone Idea, or Vi for short, is India's third largest telecom operator, clocking in almost 300 million subscribers.  However, the teleco has been hemorrhaging subscribers at an alarming rate but in the most recent quarter, they have lost "only" 2 million subscribers.

Vi's Subscriber Conundrum

Motilal Oswal, in their report released on 15th February, highlighted the current situation of Vi. The teleco lost around 8 million subscribers in Q2 FY 20-21, which was worrying in itself. When pitted against the performance of the current quarter, they have lost 75% less subscribers. This does not show the complete picture. In terms of active subscribers, Vodafone Idea continued to see a shrinking. The pace slowed there as well, though. The telecom operator lost around 4.6 million active customers in the current quarter. As with total customers, when compared with the quarter before, they have lost less than half.

However, they have plans to gain customers with their recent announcements.

The Growth

4G customer base also grew by a rate more than double that of the previous quarter, getting around 3.6 million new 4G subscribers. Interestingly, in the same time, Reliance Jio gained 5.2 million and Airtel gained a whopping 12.9 million.  This growth in the customer base in the reason why they are losing them at a slower pace, as the net customer loss decreases due to this gain.

It was estimated in the report that by the end of FY 20-21, the teleco would have gained a net 9 million data subscribers. That is going from 140 million in 19-20 to 149 million in 20-21.

However, a total net loss of 21 million subscribers leaves a lot of be desired.

Vi's Shaky Financial Situation

Estimates show that the total revenue of the telecom operator will shrink by INR 26 billion to INR 424 billion in the current financial year. It has also been stated by ICICI direct that Vi is "the weakest telecom operator" in the market at the moment, given their situation.

Liquidity remains a major concern for the teleco. The current cash reserve stands around INR 3 billion, which is a very worrying sign for the hierarchy at Vodafone Idea. There is a dire need for them to gain cash influx from somewhere. One of the few options that are left for the operator is to increase tariff prices. This is what is being planned, as suggested in the earnings call by CEO Ravinder Takkar.

"We believe that we are in the best position as the company to raise prices and increase tariffs with how much we need, we will take those steps and actions", the CEO stated.

The Future Outlook of Vi

• The teleco had the best voice quality according to TRAI's MyCall data. This data spans 3 months, from November 2020 to January 2021.
• According to Ookla, the teleco remains the fastest 4G network over the last 2 quarters.
• Vi are also planning to discontinue 3G services by the end of FY 21-22.
• The operator is fast working on the expansion of their 4G spectrum by refarming 2G and 3G spectra.
• The teleco is currently in talks with potential investors to raise INR 250 billion, in a mix of debt and equity.
• There is no debt that is payable in the next 12 months, giving Vi room to catch their breath and work towards reducing it.