Vodafone shares slumps as performance in June quarter slows

New Delhi, July 29 (Agencies): Shares of Vodafone Idea Ltd slumped 24 per cent in Monday morning trade after the company reported weak performance for the June quarter. The 4 per cent sequential fall in revenues came as a negative surprise. Introduction of minimum recharge plans for pre-paid customers is expected to help the company arrest the decline in revenue. But as it turns out, customers are loath to adopt new recharge cycles. Further, with competition persisting in low tariffs segment, the reset to lower priced post-paid plans continues, hurting revenues.

It is worrying how the company continues to lose subscribers at a brisk pace. It lost 14 lakh more subscribers last quarter (from March quarter) taking the losses in the past year to about 11.5 crore. “Management highlighted that the revenue dip was led by continued down-trading of high average revenue per user (ARPU) subscribers and low ARPU subscribers not recharging in 1QFY20 despite having recharged in 4Q19. We estimate a majority of the decline to be led by down-trading. Minimum recharge had already led to exit of around 90 million and cannot explain for most of the decline,” Jefferies India Pvt Ltd said in a note.

Jefferies fears Vodafone Idea may continue to lose subscribers. The company has been lagging peers Bharti Airtel Ltd and Reliance Jio in capital expenditure and in upgrading its network to 4G technology. The 4G coverage improved to 68.6 per cent last quarter. But the slow progress in network expansion, reflected in high single-digit growth in data volume, is a drawback. “Capital expenditure in the quarter stood at just ₹2,840 crore lower than even 4Q19 ( ₹3,200 crore). Despite having lower 4G coverage and lower data capacity, VodaIdea capex has been much lower than peers and even its own guidance ( ₹16,000 crore+ in FY20),” Jefferies added.

Agency