Key highlights from Vodafone Idea Limited (IDEA) Q3 FY23 Earnings Concall
Management Update:
- [00:05:29] IDEA said it continues to reform its 3G spectrum to 4G and have closed around 2,800 3G sites during 3Q23, while added around 2,000 4G sites. IDEA added that its broadband coverage and capacity have increased, even though the overall number of sites hasn’t changed much since 2Q23.
- [00:17:39] IDEA said data usage per broadband customer has increased to 15.1 GB per month, and voice minutes have increased by 2.4% quarter-on-quarter.
Q&A Highlights:
- [00:25:26] Vivekanand Subramaniam at Ambit asked about an update on the discussions with banks regarding deferment of bank loans due in the next 12 months. Akshaya Moondra CEO replied that the existing debt should continue to be repaid on maturity, and the new funding should be for investments. IDEA have been having constructive discussions with its consortium of bankers since the government conversion happened, and those discussions are progressing.
- [00:29:52] Sanjesh Jain from ICICI Securities queried about the tarrif hike, in which packs the hikes were taken and the quantum of it. Akshaya Moondra CEO answered that he was referring to multiple interventions over the last year, such as increasing tariffs and revising entry level plans, which have resulted in a 17.4% increase in ARPU YonY.
- [00:31:48] Sanjesh Jain from ICICI Securities asked about one of the peers taking a minimum tariff hike from INR99 to INR155 and IDEA being still at INR99. Akshaya Moondra CEO replied that IDEA is not calling it a tariff hike, as they are just removing a certain product. IDEA have seen some positive trends in two circles where this was done earlier and are continuing to watch the space to decide what is best for IDEA and its customers.
- [00:37:50] Vibhor Singhal with Nuvama Wealth asked about the strategy for prepaying certain liabilities in order to match cash flow. Akshaya Moondra CEO said IDEA has no intention to prepay anything as it would want to use whatever liquidity is available to make investments. IDEA has two types of instalments: regular installments and deferred installments arising from the reforms package. The deferred installments can be converted to equity post the moratorium period.
- [00:40:17] Kunal Vora of BNP Paribas enquired what proportion of IDEA customers are currently using 5G devices and if any churn was seen in those customers. Akshaya Moondra CEO answered that IDEA is in the early stages of deploying 5G, and believes that while it offers much better speeds, from a consumer perspective, the speed differential isn’t always visible. IDEA is focused on expediting its rollout to compete as soon as possible.
- [00:42:10] Kunal Vora of BNP Paribas asked about the drivers of increase in postpaid subscribers, from 8% to 9.6%. Akshaya Moondra CEO replied that the growth in mobile postpaid subscriptions is significant, primarily driven by the M2M segment, while the consumer postpaid segment is stable.
- [00:45:35] Kunal Vora of BNP Paribas enquired when tariff hike can be expected and what’s stopping it. Akshaya Moondra CEO said that tariff hikes are necessary because the current tariffs don’t enable companies to recover the cost of capital. However, it is not clear when the price increases will occur. In general, it is likely that higher usage will lead to higher costs, while lower usage should result in lower costs.
- [00:47:34] Aditya Chandrasekar from UBS enquired about the status of vendor payments and how much of their monthly billing have IDEA been able to pay. Akshaya Moondra CEO replied that IDEA is working with its vendors, including Indus, to prioritize essential payments and gradually unwind accumulated payables once IDEA gets funding and starts generating cash from operations. ATC has agreed to convert their payable into an OCD instrument.
- [00:50:00] Aditya Chandrasekar from UBS queried if the government is pushing back on the license fees and 5G deployment requirements for spectrum. Akshaya Moondra CEO answered that IDEA has paid a lesser amount for its license fee and are in discussions with the DoT to come up with a plan for delayed payments. IDEA will comply with the 5G minimum rollout obligation as it is not a large investment.
- [00:51:06] Piyush from HSBC queried about the info on the split of 3G/4G data and peak network capacity utilization, and how it affects the strategy around tariff hikes. Akshaya Moondra CEO replied the capacity utilization or 3G/4G traffic mix has nothing to do with the decision to eliminate an entry level tariff product. Data is currently almost entirely run on 4G networks, while 2G and 3G networks are being wound down.
- [00:55:33] Balaji Das from Bajaj Allianz asked how much fund is expected as lot of vendor payments are to be done. Akshaya Moondra CEO answered that IDEA cannot give the specific figures at this point of time, but the plan includes the current situation of the company, the funding required to move to a regular vendor payment cycle, and the necessary investments.