Vodafone Idea’s capex to spur network upgrade, 5G rollout: Report

Vodafone’s capex plans: In a bid to bolster its network infrastructure and prepare for the impending 5G revolution, Vodafone Idea Limited (VIL) has unveiled ambitious plans to invest between Rs 50,000-55,000 crore over the next three years.

The move comes on the heels of a recent capital raise aimed at addressing long-standing capex requirements and combating the persistent challenge of subscriber attrition.

Despite reporting a marginal decline in revenue, Vodafone Idea managed to achieve 2 per cent quarter-on-quarter (QoQ) growth in EBITDA during the fourth quarter of fiscal year 2024 (FY24). The growth came on the back of stringent cost-saving measures in network operational expenditure and subscriber acquisition costs. However, the company faced hurdles in the form of soaring roaming and access costs.

5G Expansion Plans

The telecom giant has identified the rollout of 4G and the impending launch of 5G as focal points for its capital expenditure strategy. This investment is expected to not only enhance network coverage but also facilitate capacity expansion and drive growth in the enterprise segment, brokerage firm Motilal Oswal said in a report.

In line with its financial outlook, Vodafone Idea has filed a petition seeking a correction of Rs 6,000 crore in adjusted gross revenue (AGR), with total dues estimated at around Rs 33,000 crore as of March 2024. Moreover, the company is engaged in discussions with a consortium of banks to secure debt financing of up to Rs 25,000 crore, coupled with additional non-fund based facilities of up to Rs 10,000 crore.

Despite challenges posed by its towering debt burden of Rs 2.1 lakh crore and annual instalment obligations of Rs 43,000 crore from FY26 onwards, VIL remains optimistic about its prospects. The company expects growth opportunities stemming from the expected tariff hike and ongoing efforts to curtail subscriber churn.

Motilal Oswal analysts have factored in a tariff hike in their projections, foreseeing a 16 per cent growth in average revenue per user (ARPU) and a commendable revenue/EBITDA compound annual growth rate (CAGR) of 18 per cent and 27 per cent respectively over the period spanning FY24-26E. Factoring in a 14 times enterprise value to EBITDA (EV/EBITDA) multiple and VIL's net debt position, Motilal Oswal assigns a target price (TP) of Rs 15 per share.