Vi (Vodafone Idea) has added ~1k telecom towers and 22k broadband sites in 2Q (42k 4G sites added, ~20k 3G sites shut down).
As a result, its 4G population coverage of Vodafone Idea increased ~22m to reach 1.05b byn Sep’24, Aditya Bansal – Research Analyst at Motilal Oswal said in a note. Management indicated that 4G population coverage would be further rampedn up to 1.1b by Mar’25 and 1.2b by Sep’25 Vi is likely to start the 5G rollout in 4QFY25.n
Vodafone Idea’s Q2FY25 performance reflected a mix of modest operational improvements and ongoing structural challenges. Here’s a breakdown of the key highlights and implications for investors:
Revenue increased by 4 percent QoQ to INR 109 billion, benefiting from a 7 percent rise in ARPU (to INR156). However, subscriber base erosion (-5.1 million QoQ) offset gains from tariff hikes.
EBITDA grew by 8 percent QoQ, with margins expanding 160bps QoQ to 41.6 percent, aided by cost control in network opex and SG&A expenses.
Vi’s subscriber base fell to 205 million, a sharper decline compared to Q1, reflecting challenges in customer retention amid stronger competition.
Capex & Network Expansion:
Capex rose to INR 14 billion, with plans to accelerate spending in 2H to INR 80 billion. Vi expanded 4G coverage by 22 million people in Q2, aiming to reach 1.2 billion by Sep’25 and start 5G rollout in Q4FY25.
Financial Challenges
Vi’s net debt surged by INR 93 billion QoQ to INR 2.12 trillion, largely due to vendor/bank dues and spectrum acquisitions. Total dues to GoI stand at INR 2.23 trillion, including deferred spectrum and AGR obligations.
Bank debt has reduced to INR 33 billion but remains overshadowed by hefty government-related liabilities.
Despite ARPU gains, Vi reported a net loss of INR 72 billion in Q2 (vs. INR 64 billion in Q1), driven by rising finance costs and depreciation.
Management is engaged with lenders and the government for bank guarantee waivers (~INR 250 billion) to facilitate debt raising, critical for sustaining network investments.
Vi continued to lose market share to competitors like Bharti Airtel, which gained ~90bps QoQ in RMS. Reliance Jio and Airtel’s superior cash generation and deeper financial resources further widen the competitive gap.
Tariff hikes partially supported revenue, but customer reluctance to upgrade recharge plans poses risks to sustained ARPU growth.
Investment View
Vi remains in a precarious position, with its survival hinging on successful debt restructuring and operational turnaround. Key areas of concern include:
Leverage: With mounting debt and annual repayments to GoI starting FY26, financial sustainability remains uncertain.
Subscriber Retention: Stabilizing the subscriber base will require significant investments in network quality and customer engagement.
Government & Lender Support: Vi’s ability to secure waivers and raise funds is critical to its recovery strategy.
Vi’s recovery potential is tightly linked to external support and competitive positioning, making it a high-risk, speculative investment for now.
Vodafone Idea continues to face a complex set of operational, financial, and strategic challenges that threaten its recovery and competitiveness in the Indian telecom sector. Here are the key issues:
While Vi implemented a blended tariff hike of 16-17 percent, its Enterprise and M2M segments did not see any tariff increases.
A portion of subscribers are reluctant to upgrade their recharge plans to pre-hike data consumption levels, resulting in 2-3 percent lower-than-expected realization from the tariff hike.
The subscriber base declined by 5.1 million QoQ to 205 million in Q2FY25, with industry churn exacerbated by tariff hikes.
BSNL’s recent 4G launch and absence of a tariff hike have attracted price-sensitive users, intensifying subscriber losses.
Stabilizing subscriber trends remains a challenge, though management indicates some normalization in recent months.
Vi lags competitors in network investments:
Rolled out 42k 4G sites in Q2, expanding 4G coverage by 22 million, but still far behind Airtel and Jio in terms of reach and quality.
Plans to invest INR 80 billion in H2FY25 for 4G expansion and begin 5G rollouts by Q4FY25 may face execution risks due to funding constraints.
Vi’s net debt increased to INR 2.12 trillion, largely driven by repayments to vendors and spectrum purchases.
Annual repayment obligations of INR 440 billion to the GoI from FY26 amplify its funding challenges.
The AGR waiver request rejection and lender demands for clarity on bank guarantee waivers (~INR 250 billion) have delayed Vi’s critical debt-raising efforts.
Rivals Reliance Jio and Airtel are gaining market share due to stronger financials and superior network quality.
Jio and Airtel reported higher EBITDA growth and margins compared to Vi in Q2FY25, underscoring their competitive edge.
Vi’s limited free cash flow generation and mounting debt hinder its ability to match competitors’ aggressive investments.
While Vi has launched bundled offerings (Mobility + Broadband + OTT) in select markets, adoption and scaling depend on resolving operational and financial constraints.
Partnerships, such as the tie-up with Asianet in Kerala, remain in early stages and may not significantly impact its competitive positioning in the short term.
Vi’s survival is heavily dependent on ongoing support from the government:
Securing waivers for bank guarantees worth INR 247 billion to securitize spectrum installments.
Continued engagement with the DoT for relief measures under the September 2021 reforms package.
Vi’s revenue growth is largely driven by ARPU increases rather than subscriber growth, a risky strategy given its declining user base.
ARPU improvement (+7 percent QoQ to INR 156) was comparable to Airtel and Jio, but sustaining this trend amid economic pressure on low-income users is uncertain.
Vi faces a multi-front battle involving subscriber retention, debt restructuring, and operational improvements. Its ability to secure funding, execute planned network expansions, and stabilize its subscriber base will be critical to its survival. Without significant progress in these areas, Vi risks further erosion of its market share and financial health.
