Vodafone Idea Posts a Loss Again as Rivals Lure Away Users
(Bloomberg) -- Vodafone Idea Ltd., India’s number three wireless phone operator, posted another quarter of losses as rivals lured away customers amid cut-throat competition in the sector.
The Mumbai-based joint venture between Vodafone Group Plc and Indian billionaire Kumar Mangalam Birla’s conglomerate posted a higher-than-expected loss 73.2 billion rupees ($986 million) for the quarter through June, compared with a 254.6 billion-rupee loss in the same period last year, according to an exchange filing Saturday. Revenue fell 14% to 91.5 billion rupees.
Results were affected by “significant disruptions and slowdown in economic activity” caused by India’s severe second Covid-19 wave, Ravinder Takkar, chief executive officer, said in a statement.
“We continue to focus on executing our strategy to keep our customers ahead, and our cost optimization plan remains on track to deliver the targeted savings. We are in active discussion with potential investors for fund raising, to achieve our strategic intent,” he said.
- The earnings underscore the worsening financials of the beleaguered wireless operator which saw Birla step down as its non-executive chairman 10 days back without an explanation. Vodafone Idea’s survival is currently threatened by the Indian government’s claim of $7.8 billion in backdues.
- Birla had previously written to Prime Minister Narendra Modi’s administration seeking immediate support and had offered to give up his stake in the telecom operator.
- He warned in December 2019 that the venture was headed for insolvency in the absence of relief on the dues.
- Vodafone Idea also suffered a setback last month when India’s Supreme Court rejected petitions by wireless operators to reassess their backdues to the government.
- Its distress also points to the necessity for another round of tariff hikes in the sector as well as the urgent need to raise funds through stake sales. Its bigger rival Bharat Airtel Ltd. surprised markets by raising tariffs last month.
- Vodafone Idea hasn’t reported an annual profit after March 2016 as the sector was disrupted by the entry of Mukesh Ambani’s Reliance Jio Infocomm Ltd. later that year. Jio debuted with ultra-low prices, forcing rivals to quit, merge or go bankrupt.
- The Indian government is likely preparing a relief package for the telecom sector, according to a local media report, which may turn out to be a lifeline for Vodafone Idea.
- Vodafone Idea’s shares have dropped 41% this year so far, making it the worst performer on the S&P BSE Telecom index, which has surged 22% in 2021.
- Vodafone Idea said it is in “active discussions” with potential investors to raise funds.
- Total number of subscribers fell to 255.4 million from 267.8 million in in the preceding quarter.
- Mobile average revenue per user was at 104 rupees down from 107 in the previous quarter.
- Total expenses rose 2.1% to 166.8 billion rupees, while net debt stood at 1.9 trillion rupees.
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