Tue Sep 24 03:11:07 UTC 2024: ## Vodafone Idea Aims for Turnaround with Massive Investment and Tariff Hike

**New Delhi:** Telecom operator Vodafone Idea (VIL) has outlined an ambitious turnaround plan, with significant investment and a planned tariff hike, in an investor call.

The company expects subscriber churn to decrease starting from the March quarter, coinciding with the commencement of a planned Rs 50,000-55,000 crore capex rollout starting in the December quarter. This investment will focus on expanding 4G coverage, launching 5G services, and increasing network capacity.

To fuel this growth, Vodafone Idea is pursuing a Rs 35,000 crore debt fundraising, expected to conclude in the next 7-8 weeks. The company is also planning another 20% tariff hike between the second and third quarters of the fiscal year 2026, mirroring the July 2024 hike.

**Key Highlights:**

* **Capex:** The three-year capex plan includes Rs 30,000 crore for network equipment from Nokia, Ericsson, and Samsung, with deliveries starting in the second half of the upcoming quarter.
* **Subscriber Growth:** The company aims to increase 4G coverage by adding 215,000-220,000 sites to its existing network of 170,000 sites.
* **Debt Management:** Vodafone Idea is in advanced stages of securing Rs 35,000 crore in loans.
* **Tariff Hike:** The company is expecting a 20% tariff hike in the next year.
* **AGR Setback:** While the Supreme Court dismissed its curative petition on the Adjusted Gross Revenue (AGR) issue, Vodafone Idea is actively engaging with government officials to explore possible solutions.

**Challenges Remain:**

Despite the ambitious plan, Vodafone Idea faces significant challenges. The company still carries a debt of Rs 2 lakh crore with annual installments of Rs 43,000 crore starting from fiscal year 2026. MOFSL, a domestic brokerage, believes that the significant cash flow required for debt servicing limits upside potential for equity holders, despite the potential for improved ARPU.

**Outlook:**

Analysts at MOFSL are forecasting a revenue/Ebitda CAGR of 11%/31% over fiscal years 2024-26. Based on a 14 times EV/Ebitda valuation and factoring in net debt, they have set a target price of Rs 12 for the stock. While they acknowledge the potential for positive developments, MOFSL maintains a Neutral rating on the stock.

The success of Vodafone Idea’s turnaround plan hinges on the ability to attract new subscribers and reduce churn, which will be crucial for the company’s long-term viability.

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