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Vodafone-Idea Network Integration Key To Growth

Network integration key to Voda-Idea strength for June 2020 target

Vodafone and Idea have removed surplus equipment from nearly 38,000 sites. Pixabay

For Vodafone-Idea, the recovery hinges on network integration, cash position say analysts and the telco is well placed to realize full OpEx synergy of Rs 8,400 crore by June 2020 says its management.

Motilal Oswal in a recent note said subscriber churn continues to hurt Vodafone Idea.

For the British Indian company, 1QFY20 revenue declined 4.3 per cent QoQ to Rs 11,270 crore, led by continuing high subscriber churn (lost 14 million subs QoQ).

However, it was partly offset by a rise in ARPU of 4 per cent QoQ to Rs 108 due to Minimum Recharge Plans. On pre Ind-AS 116 basis, EBITDA declined 31 per cent QoQ to Rs 1,240 (v/s reported EBITDA of Rs 3,650 crore), with 420bp drop in margins as synergy gains were unable to insulate the decline in revenue. Adjusted loss on pre Ind-AS 116 basis stood at Rs 4,120 crore v/s Rs 4,060 crore QoQ. Broadband subscribers remained flat QoQ at 110.5 million, while 4G subs addition remained dismal at 4.1 million.

On a Concall Q1 post result highlights emerged as — Of the total Rs 8,000 crore synergy to be realized by Jun 2020, 70 per cent target synergies have been realized by June 2019. The management Reiterated network integration across circles and 95 per cent of 4G population in high potential districts by FY20. VIL’s External debt of Rs 4,100 crore is maturing in FY20 and Rs 4,200 debt in FY21.

The efforts towards network integration, capacity expansion and merger synergies has been plausible. Pixabay

“As a result of the integration exercise, we have removed surplus equipment from nearly 38,000 sites, of the total 73,000 co-located sites further benefiting our cost base. As of June end, we’re pleased to announce that we’ve achieved 70% of our target synergies. Long story short, we are moving at a great pace and are well placed to realize full OpEx synergy of INR 84 billion by June 2020. This was about the strategic pillar 1,” the management said in its concall in July.

Motilal Oswal said the telcos have Sufficient cash to operate for the next 4-5 quarters. “The current net debt/cash position stands at Rs 99,300 crore — Rs 21,200 crore and an additional Rs 10,000-Rs 12,000 could be raised through monetization of the Bharti Infratel stake sale and fiber assets, and another Rs 5,000 crore through cash flow from operation (CFO).

Revenue decline due to high subscriber churn. Pixabay

“Against this, VIL has estimated annual cash requirement of Rs 28000 crore (capex of Rs 12,000 crore, debt repayment of Rs 4,200 crore and interest cost of Rs 12000 crore) over the next two fiscals. Thus, the current cash plus additional monetization opportunity could optimistically suffice for the next 4-5 quarters.

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“The efforts towards network integration, capacity expansion and merger synergies has been plausible and is expected to boost 4G coverage to 90 per cent by June 2020 — at par with competition. Until then, the subscriber churn coupled with cash flow crunch could risk the operating capability of the company.”

VIL’s key worry is the debt trap with net debt to EBITDA of over 15x, thus, any fund raise would be utilized to service debts. The positives are strong promoter backing and operating leverage opportunity from any ARPU increase. But, it needs to manage the cashflow until its network stabilizes by June 2020. (IANS)

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Vodafone Battles Income Tax Department Seeking Refunds

After the Supreme Court judgement on AGR, tax officers are in fix that since refund is pending how do they adjust with the AGR payments

Vodafone logo.

Vodafone India and the Income Tax Department are battling it out as Vodafone seeks refunds while the Income Tax Department is laying claim to previous demands.

From assessment year 2006-07 to 2013-14, Income Tax department has raised demands of Rs 1842 crore and the demands under different sections have been stayed by the tribunal.

These include Section 250, 143, 143 (3), and 263, all of which have been stayed by the tribunal.

As per the tax assessment in the Mumbai circle, in 2010-11, The demand of assessment year was Rs 2127 crore adjusted against refund on October 11 by CPC although the demand was stayed by ITAT.

The Income Tax Department has sent a second notice to Deepak Kochhar, husband of ICICI Bank Chief Executive Chanda Kochhar, who is facing conflict of interest questions over the bank's Rs 3,250-crore loan to the Videocon Group in 2012, a department official said on Monday.
Income tax Department Logo. IANS

The refund was approved but the refund was not issued due to a error while reading by CPC-ITR. A complaint was lodged for the same by IT Department.

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Thereafter for 2018-19, the scrutiny is pending and therefore the refund has been withdeld under Section 281 B of the IT Act. Since the scrutiny is pending no refund has been give,

After the Supreme Court judgement on AGR, tax officers are in fix that since refund is pending how do they adjust with the AGR payments. (IANS)