Vodafone Idea Limited — Q3 FY25 earnings call

Call held 12 Feb 2025

Management summary

Vodafone Idea reported a strong Q3 FY25 with revenue growth of 4.2% YoY and a 15% YoY increase in EBITDA (ex-IndAS116), reaching ₹24.5 billion. The company significantly ramped up Capex to ₹32.1 billion for the quarter, driving 4G network expansion and improved coverage, which has led to positive VLR net adds in 11 circles. While a substantial PAT loss of ₹66.1 billion was recorded, management highlighted ongoing efforts to secure debt funding and the necessity of further tariff hikes for industry sustainability.

Highlights

  • Revenue increased to ₹111.2 billion, marking a 4.2% YoY growth.

  • EBITDA (excluding IndAS116) improved by 15% YoY to ₹24.5 billion, with the margin reaching 22%.

  • Capex for Q3 FY25 was ₹32.1 billion, exceeding the combined spend of the first two quarters.

  • 4G population coverage expanded by 41 million, reaching 1.07 billion by December 2024.

  • Combined VLR subscriber numbers for December and January showed positive net adds in 11 circles.

Concerns

  • The company reported a PAT loss of ₹66.1 billion for the quarter.

  • Industry's Return on Capital Employed (ROCE) remains low, necessitating further tariff increases.

  • Closure of debt funding is ongoing, with banks seeking clarity on the Adjusted Gross Revenue (AGR) front.

Key financials

  1. Revenue 111.2 Bn +4.2%YoY
  2. EBITDA (ex-IndAS116) 24.5 Bn +15%YoY
  3. EBITDA Margin (ex-IndAS116) 22%
  4. Reported EBITDA (inc. IndAS116) 47.1 Bn +8.3%YoY
  5. Reported EBITDA Margin (inc. IndAS116) 42.4%
  6. PAT Loss 66.1 Bn
  7. Customer ARPU (ex-M2M) QoQ Growth 4.7% +4.7%QoQ

What they filed

Q1 FY27: revenue up 5.8%, net profit up 44.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue10,841 11,024 10,880 10,906 11,068 +2%11,214 +2%11,197 +3%11,539 +6%
EBITDA4,351 4,553 4,420 4,355 4,457 +2%4,602 +1%4,653 +5%4,808 +10%
Net profit-7,210 -6,493 -7,268 -6,633 -5,584 +23%-5,324 +18%52,022 +816%-3,712 +44%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹32.1 Bn this quarter · ₹100 Bn (FY25) planned
    • Network rollout and expansion
    • 4G on sub-GHz 900 MHz band across ~15,000 sites
    • Adding ~4,000 unique broadband towers
    • Adding ~10,400 sites in 1800 MHz and 2100 MHz bands
    • Deployment of High Powered Small Cells
    For Q3FY25, we invested Rs. 32.1 billion which is more than what we did in first two quarters combined, bringing the total Capex for the first nine months of FY25 to Rs. 53.3 billion. The pace of network rollout is set to accelerate further with the full year expected capex to be around Rs. 100 billion. During the quarter, we made substantial strides in expanding our network footprint, adding over 4,000 unique broadband towers, the largest quarterly addition since our merger. Our network enhancement efforts included the deployment of 4G on the sub-GHz 900 MHz band across approximately 15,000 sites, improving both coverage and indoor network experience. We also expanded our network capacity by adding approximately 10,400 sites in the 1800 MHz and 2100 MHz bands, which have resulted in faster data speeds of nearly 28%.
  • Debt Gross ₹23.3 Bn
    • Repayment Debt from banks reduced by Rs. 52.9 billion during the last one year. ₹52.9 Bn
    The debt from banks reduced by Rs. 52.9 billion during the last one year and is currently at Rs. 23.3 billion as at the end of Q3 FY25 vs Rs. 76.2 billion in Q3FY24.
  • Liquidity Cash ₹120.9 Bn Cash and bank balance mainly from FPO proceeds, to be used for Capex.
    The cash and bank balance comprising mainly of FPO proceeds to be used for Capex is Rs. 120.9 billion as of December 31, 2024.

Guidance & targets

Capex

  • Full Year Capex Capex · FY25 · High confidence around Rs. 100 billion
    The pace of network rollout is set to accelerate further with the full year expected capex to be around Rs. 100 billion.

    — Akshaya Moondra

Capacity

  • 4G Tower Count Capacity · since investment cycle start · High confidence approx. 215-220,000
    Our immediate plan is to add another 13,000 towers till middle of next quarter i.e. Q1. We plan to take 4G count to approx. 215-220,000 i.e. an increase of over 45,000 4G towers since the start of this investment cycle.

    — Akshaya Moondra

  • 4G Tower Additions (Short Term) Capacity · till middle of next quarter (Q1) · High confidence another 13,000 towers
    Our immediate plan is to add another 13,000 towers till middle of next quarter i.e. Q1.

    — Akshaya Moondra

Coverage

  • 4G Population Coverage Coverage · by March 2025 · High confidence 1.1 billion

    From 1.07 billion (Dec 2024) today

    We are on track to meet our 4G population coverage target of 1.1 billion by March 2025 i.e. further expand population coverage by 30 million in just 3 months.

    — Akshaya Moondra

  • Ultimate 4G Population Coverage Coverage · Medium confidence 1.2 billion (~90% population coverage)
    Our plan is to finally take it to 1.2 billion i.e. ~90% population coverage.

    — Akshaya Moondra

5G Rollout

  • 5G Launch - Mumbai 5G Rollout · March 2025 · High confidence March
    We have clearly stated that Mumbai launch is slated for March and Delhi, Bangalore, Chandigarh and Patna are slated for April.

    — Akshaya Moondra

  • 5G Launch - Delhi, Bangalore, Chandigarh, Patna 5G Rollout · April 2025 · High confidence April

    — Akshaya Moondra

Tariff

  • Next Tariff Hike Timeline Tariff · Medium confidence 9-12 months (or faster)
    In a normal scenario I would have said that a time gap of one year is ideal between two tariff increases. However, I would add to that given the place where the telecom industry in India is today... if it can be faster, it could be nine months also, I would say.

    — Akshaya Moondra

Debt

  • AGR Liability Annual Installment Debt · annually after monitoring period · High confidence roughly about 16,000 crores
    On the AGR liability, the installment annually after the monitoring period is roughly about 16,000 crores.

    — Murthy GVAS

  • Spectrum Installment Debt · FY26 · High confidence about 12,000-13,000 crores
    The spectrum installment in FY26 is about 12,000-13,000 crores

    — Akshaya Moondra

  • Spectrum Installment Debt · FY27 · High confidence more like 26,000-27,000 crores
    and in FY27 it will be more like 26,000-27,000 crores.

    — Akshaya Moondra

What to watch in Q4 FY25

Closure of debt funding

next quarter
Current Ongoing discussions with lenders, awaiting clarity on AGR
Target Announcement of debt funding closure

Why it matters

Essential for executing the long-term network expansion plan and improving financial stability.

We remain actively engaged with our lenders for tying up debt funding towards the execution of our long term network expansion... These are progressing and we believe that we should be able to come to a conclusion soon.

Risks & concerns

  • Low Industry ROCE

    high

    The industry's ROCE continues to remain low, necessitating further tariff increases to recover cost of capital and sustain future growth.

    Management acknowledged

  • PAT Loss

    high

    The company reported a significant PAT loss of ₹66.1 billion for the quarter.

    Management acknowledged

  • Debt Funding Closure

    medium

    Discussions with banks for debt funding are ongoing, with banks seeking clarity on the AGR front before finalization.

    Management acknowledged

Q&A highlights

7 direct
Network expansion impact on subscriber metrics (churn vs gross adds) Direct
if there is any improvement in subscriber metrics without any change in the gross ads trajectory, then it has to come from the improvement in retention of the subscribers or better quality of subscribers which has been our focus for the last few months.

Clarifies that initial network investments are primarily improving retention and subscriber quality, rather than immediately boosting gross additions, which is a key driver for future ARPU and subscriber base stability.

Asked by Vivekanand

Timing and structure of next tariff hike Direct
In a normal scenario I would have said that a time gap of one year is ideal between two tariff increases. However, ... if it can be faster, it could be nine months also, I would say.

Provides management's view on the timeline for the next tariff hike, indicating a potential for it to occur sooner than the typical 12-month cycle due to industry ROCE pressures.

Asked by Vivekanand

Government engagement on deferred payments/equity conversion Partial
The action by the government in waiving the bank guarantees is a clear indication from the government that they remain committed to support the telecom sector through reforms as and when required. And that has given confidence to the banks.

Addresses investor concerns about government support for the company's financial stability, highlighting the bank guarantee waiver as a positive signal for ongoing debt funding discussions.

Asked by Vivekanand

Network operating cost increase with network expansion Direct
as you roll out a new site, the cost, it varies from circle to circle. But a new site energy cost plus rental is in the ballpark of Rs. 60,000 to 70,000 per month.

Provides a quantitative estimate for the incremental operating cost per new site, crucial for modeling future profitability as network rollout accelerates.

Asked by Sanjesh Jain

5G rollout timeline and priority circles Direct
Mumbai launch is slated for March and Delhi, Bangalore, Chandigarh and Patna are slated for April.

Gives specific timelines and locations for the initial 5G commercial launches, indicating concrete progress on 5G deployment.

Asked by Sanjesh Jain

ARPU growth drivers without tariff hikes (premiumization, postpaid) Direct
if a subscriber is being counted but it is not a primary SIM for them, then they recharge infrequently. That kind of reduces the ARPU. But if they become the primary SIM and it recharges regularly, then the ARPU goes up.

Explains the strategy for organic ARPU growth through converting secondary SIM users to primary, upgrading to higher plans, and bundled offerings, beyond just tariff increases.

Asked by Sanjesh Jain

Divergence between postpaid subscriber growth and data usage decline Direct
postpaid subscribers, while being high ARPU, they are not the ones which drive the trends of consumption. So, postpaid subscribers are going up. And as I had alluded that which I believe you would have noticed that if you just look at the postpaid subscribers, it's a mix of M2M and the consumer space. A large part of the overall postpaid increase is coming from M2M.

Clarifies that M2M connections are a significant part of postpaid growth, and overall data usage trends are primarily driven by prepaid subscribers, explaining the apparent divergence.

Asked by Aditya Bansal

Impact of BSNL on port-ins/outs and 5G user base Direct
In terms of the impact of BSNL, the impact has completely reversed. If I just look at June versus what is happening currently, the net port ins from BSNL has increased from June to January as far as we are concerned.

Addresses concerns about competitive pressure from BSNL, indicating a reversal of earlier port-out trends, and provides qualitative insight into increasing 5G device penetration on their network even before 5G launch.

Asked by Vivekanand

3 min read 6 chapters

Detailed narrative

Market Overview and Tariff Hikes

The Indian wireless broadband subscriber base grew by approximately 45 million between November 2023 and November 2024, reflecting a 5% growth, yet overall broadband penetration remains below 65%. Private mobile operators implemented a tariff hike in July 2024, which improved ARPU and revenue, but the industry's ROCE remains low. Management emphasized the necessity of further tariff increases, suggesting a potential timeline of 9-12 months, or even faster, to recover the cost of capital and sustain future growth. They advocate for a pricing model where heavy data users contribute more for higher usage, while maintaining affordability for basic users.

Network Expansion and 4G Coverage

Vodafone Idea significantly increased its Capex, investing ₹32.1 billion in Q3 FY25, bringing the total for the first nine months of FY25 to ₹53.3 billion, with a full-year target of ₹100 billion. The company added over 4,000 unique broadband towers and deployed 4G on the 900 MHz band across approximately 15,000 sites, enhancing coverage and indoor network experience. 4G population coverage expanded by 41 million, reaching 1.07 billion by December 2024, with a target of 1.1 billion by March 2025 and an ultimate goal of 1.2 billion (~90% population coverage). These initial investments have resulted in positive VLR net adds in 11 circles in December and January.

5G Rollout Plans

The company confirmed that 5G rollout is underway, with Mumbai slated for launch in March 2025, followed by Delhi, Bangalore, Chandigarh, and Patna in April 2025. Management noted that site rollout is progressing and they are awaiting a certain threshold before commercial launch. While specific 5G user numbers were not disclosed, the company observed a constant increase in 5G devices on its network, anticipating faster growth post-launch. The goal is to deliver superior quality 5G services, similar to their recognized 4G network performance.

Strategic Initiatives and Digital Services

Vodafone Idea is transforming into a technology-driven enterprise, expanding beyond connectivity to offer advanced solutions like SD-WAN, IoT, and cloud services. They launched hyperlocal marketing campaigns to highlight network improvements and introduced new offerings like the Vi Movies & TV Super pack at ₹175, combining data benefits with access to 15+ OTT platforms. The Vi App is being enhanced with features like UPI autopay and recharge options even with zero daily data, aiming to drive digital engagement and monetization. The company also launched an AI and ML-powered spam management solution to protect users from unsolicited messages.

Financial Performance and Debt

For Q3 FY25, revenue stood at ₹111.2 billion (up 4.2% YoY), and EBITDA (excluding IndAS116) was ₹24.5 billion (up 15% YoY), with a 22% margin. Reported EBITDA (including IndAS116) was ₹47.1 billion (up 8.3% YoY), with a 42.4% margin. The company reported a PAT loss of ₹66.1 billion. Debt from banks reduced by ₹52.9 billion YoY to ₹23.3 billion by end-Q3 FY25, with cash and bank balances at ₹120.9 billion. Deferred payment obligations include AGR dues of approximately ₹700 billion and spectrum dues of approximately ₹1400 billion.

Government Support and Regulatory Environment

The Department of Telecommunication (DoT) extended support by waiving the Bank Guarantee requirement for spectrum auctions prior to 2021, which previously aggregated to ~₹247.5 billion. This move, along with the equity infusion of ₹260 billion in the last 10 months, has bolstered discussions with lenders. Management highlighted that the government, as the largest stakeholder, is cognizant of the need for solutions, including potential conversion of deferred payments (AGR and spectrum dues) into equity, though the final structure is still under discussion. The waiver of BGs has given confidence to the banks to move forward with debt funding discussions.

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