Shares of Vodafone Idea Ltd (VIL) saw an uptick in early trading on Wednesday following the telecom operator's announcement of positive subscriber additions during the June quarter. This marks a significant turnaround, as it is the first time VIL has reported net subscriber growth since the merger of Vodafone India and Idea Cellular in 2018.
According to global brokerage Nomura, VIL added 3 lakh new subscribers in the June quarter, bringing its total subscriber base to 19.31 crore. The news propelled VIL's stock price, which was trading 3.10 percent higher at Rs 13.32 at last check.
Financial Performance Highlights
VIL's financial results for Q1 FY27 also presented a positive picture. Revenue stood at Rs 11,700 crore, representing a 3.2 percent quarter-on-quarter (QoQ) increase and a 6 percent year-on-year (YoY) rise, surpassing Nomura's estimates by 1.6 percent. The Average Revenue Per User (ARPU) climbed 1.7 percent QoQ to Rs 177, aligning with analyst expectations.
Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) reached Rs 5,030 crore, up 3 percent QoQ and 9.1 percent YoY. The EBITDA margin remained stable QoQ at 43.1 percent. Furthermore, net debt saw a substantial decline of 20.5 percent QoQ, falling to Rs 1.5 lakh crore from Rs 1.9 lakh crore in Q4 FY26, partly aided by proceeds from warrant issuance. However, capital expenditure (capex) decreased 15.9 percent QoQ to Rs 1,900 crore due to supply-side challenges.
Capex Plans and Future Outlook
VIL is executing a three-year capital expenditure program totaling Rs 45,000 crore. Nomura highlighted that the company has already placed capex orders worth Rs 9,000 crore, which are slated for deployment over the next two quarters. Management has reiterated its ambitious FY29E targets, including a 16.8 percent revenue Compound Annual Growth Rate (CAGR), sustained positive net subscriber additions, and a three-fold increase in cash EBITDA from the FY26 base of Rs 9,200 crore.
Nomura's projections for VIL include a gradual increase in subscriber additions, estimating 28 lakh, 6 lakh, and 8 lakh new users in FY27, FY28, and FY29 respectively. The brokerage also forecasts approximately a 9 percent ARPU CAGR over the FY26-29 period, leading to projected EBITDA and Free Cash Flow (FCF) CAGRs of 15 percent and 26 percent, respectively, during the same timeframe.
Analyst Ratings and Target Price Revisions
Despite the positive developments, Nomura maintained its 'Neutral' rating on Vodafone Idea shares but adjusted its target price upwards to Rs 13.50 from the previous Rs 12.60. Meanwhile, Nuvama Institutional Equities noted VIL's success in curbing subscriber losses and improving ARPU and churn rates. Nuvama emphasized that the company's focus now shifts to efficient capex deployment and the pending debt fundraise.
Nuvama revised its FY27E/28E EBITDA slightly downwards by -2.6 percent and -0.8 percent, attributing this to a one-quarter delay in its assumed FY27 tariff hike. The domestic brokerage retained its 'Hold' rating on VIL but trimmed its target price to Rs 13 from Rs 13.50 previously.