Vodafone idea (Vi) expects monthly subscriber churn, which currently stands at 4%, to decline from the fourth fiscal quarter as the company hopes to plug gaps in 4G coverage with network capex execution, the telecom company's executives recently told analysts.
Vi plans to expand data capacity by 15% and increase 4G coverage to 16 million population by the end of September immediately after the capital raising of Rs 24,000 crore, the telecom company's senior management said.
The telecom JV between Britain’s Vodafone and India’s Aditya Birla Group also expects the recently acquired sub-GHz spectrum to expand the 900MHz band’s presence in 16 of the 17 priority circles during the June 2024 auction, improving the customer experience in 4G.
Analysts participating in the call expect Vi to resume growth with a fair number of new subscribers as the company gradually fills gaps in 4G coverage and adds more data capacity.
“Vi expects the monthly churn rate to decline after the next quarter as capex implementation begins. The capital raising has provided some respite as long-running capex and ongoing subscriber churn have hurt operating performance,” Motilal Oswal said in a research note seen by ET.
Analysts on the call said Vi's first priority is to reverse the 3.2 million average subscriber decline over the past four quarters.
However, Vi's senior management said it would take some time before the telco's net subscriber growth trajectory changed. Vi lost 2.5 million customers in the June quarter, taking its user base down to 210.1 million.
According to Vi, the main reason for the higher churn is the relatively poor 4G coverage and capacity compared to competitors. ICICI Securities has indicated that the company is planning to adjust its 4G coverage requirements soon.
Over the past four quarters, Vi's subscriber churn has been in the range of 3.9-4.3%. In contrast, Jio and Air Count Churn levels were much lower at 1.7% and 2.8% in Q1FY25.
To address this disparity, Vi’s planned capex program will be front-loaded in the first 18 months, with a priority on improving 4G coverage expansion and reducing capacity congestion, according to senior executives at the company.
“If Vi is able to materially halt the decline in subscriber numbers in the coming quarters and return to growth, it will significantly improve the stock's outlook and lead to higher earnings,” Nomura Research said in a note.
Vi shares were up 0.19% to Rs 15.82 on the BSE early Friday afternoon.
The company is in talks with lenders to raise an additional Rs 25,000 crore through loans and another Rs 10,000 crore in non-fund based facilities to realise its targeted network capex plans of Rs 55,000 crore over the next three years.
The company's senior management expects that the recent rate increases will lead to low SIM consolidation, as price increases for the minimum (entry level) top-up are lower than for other bundles.
Last month, Vi raised mobile rates by 10-23% to boost average revenue per user (ARPU), but the telecom company said it would continue to support entry-level users, for whom the price increases were minimal.
