Vodafone Idea edges higher ahead of Q4 results. Here’s what analysts say

NEW DELHI: Shares of Vodafone Idea edged higher in Tuesday’s trade ahead of its quarterly earnings scheduled for release later in the day.

The telecom operator is seen narrowing losses in March quarter while it is expected to report flat-to-single digit growth in sales on a year-on-year (YoY) basis amid a drop in the pace of market share loss due to the lockdown. Analysts said management commentary on the adjusted gross revenue (AGR) issue will be keenly followed.

At 9.20 am, the scrip traded 0.27 per cent higher at Rs 11.15 on BSE.

Motilal Oswal Securities expects the telecom operator to report losses to the tune of Rs 4,473 crore against a Rs 4,882 crore loss reported for the year-ago quarter. The brokerage expects sales to fall 0.9 per cent YoY to Rs 11,700 crore and pegs Ebitda at Rs 3,792 crore, up 112 per cent YoY.

Axis Securities estimated losses at Rs 4,268 crore on a 3.6 per cent rise in consolidated quarterly revenue of Rs 11,494 crore.

Brokerage Credit Suisse said the telecom operator should report less-than-expected Arpu recovery despite tariff hikes in December 2019, but believes March lockdown would have reduced subscriber market share loss for the company.

“We expect a 2.9 per cent drop in subscriber base and 6.5 per cent fall in sequential Arpu growth. As a result, we expect the company’s consolidated revenue to grow 3.3 per cent sequentially and Ebitda by 11 per cent QoQ. Ebitda will benefit from the improvement in Arpu as 70-80 per cent of the incremental revenue will flow through Ebitda,” it said.

Motilal Oswal Securities expects a subscriber churn of 5 per cent over January and February, with a flat subscriber base in March. Vodafone Idea’s data usage may improve to 10 GB per subscriber from 9 GB while voice minutes per user per month may rise to 687 from 674, said Emkay Global.

BNP Paribas expects Vodafone Idea’s operating performance to stay strong, but balance sheet concerns persist. The company is facing a risk to continuity of business due to the AGR liability, it said.

“During the earnings call, we will primarily look for management’s comments regarding the next steps post SC’s recent AGR verdict, wherein it rejected the company’s self-assessed amount and strategies to improve financial health of the company,” Credit Suisse said.

The Supreme Court has taken cognizance of Vodafone Idea’s argument that the telecom operator did not have the means to make additional bank guarantees for AGR dues. But while deferring its hearing on the matter till the third week of July, the apex court asked the telecom operator to make a reasonable upfront payment to claim the benefit of staggered AGR dues.

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