Vodafone Idea Limited – FPO Offer

Issue Period: 18^th Apr 2024 – 22^nd Apr 2024

Company Background

Incorporated in March 1995, Vodafone Idea Limited is a telecommunications service provider in India. The company provides voice, data, and value-added services across 2G, 3G, and 4G technologies, such as short messaging and digital services for enterprises and consumers. As of December 31, 2023, the company had over 223.0 million subscribers and a subscriber market share of 19.3%. Its network carried 401 billion voice minutes and 6,004 billion MB of data. As of Dec 31, 2023, Vodafone offers mobile and fixed services to 300M+ customers in 17 countries and has IoT collaborations with networks in 45 other countries. Internet of Things (IoT) platforms in the world. The company operates under a strong brand with over three decades of experience from Vodafone and Idea.

Company Key Highlights

Vi ranks as the 3rd largest telecommunications service provider in India by subscriber base and stands as the 6th largest cellular operator globally within a single country. Offering voice, data, enterprise, and value-added services like SMS and digital services across 2G, 3G, and 4G technologies, Vi also caters to enterprise connectivity needs. Holding licenses for national and international long-distance services, internet service provision, and infrastructure provider registration, the company ensures comprehensive coverage.

• Large Subscriber Base: Vi, India’s 3rd largest telecom provider, holds over 223 million subscribers with a 19.3% market share as of December 31, 2023. Its ApGR market share is 17.79%, leading in Kerala and Mumbai and ranking second in Gujarat and Kolkata. In Maharashtra, Delhi, Uttar Pradesh (West), and Haryana, Vi’s market share exceeds 20%. Utilizing AI and data analytics, Vi enhances services like customer segmentation, targeted marketing, and personalized recommendations.
• Extensive Telecommunication Network: VI’s extensive spectrum portfolio ensures superior customer experience, with the highest 4G availability and readiness for 5G migration. Operating 183,400 towers nationwide and serving broadband to over 438,900 units, VI reaches over a billion people. Post-merger, 4G coverage expanded to over a billion Indians. With nationwide VoLTE services and ongoing discussions for 5G rollout, VI is well-positioned for growth.
• Existing Network Built on 5G-Ready Architecture: VI’s new basebands and over 90% of its TDD 2500 MHz band radio units are 5G-ready, boasting 10G bandwidth capability. With advanced 5G technologies like Massive MIMO and ORAN, VI enhances capacity and flexibility. As of December 31, 2023, VI deployed 74,800 TDD radios, 13,900 Massive MIMO sites, and 13,000 small cells. Completing rollout obligations in four service areas, VI promotes E-band technology and supports 5G NSA with a pan-India core network. Prioritizing data security, VI houses critical equipment in secure cloud data centers across India, with extensive IoT connectivity.
• Trusted Brand with Strong Proposition: The “Vi” brand, established over 3 years ago, enjoys recognition and recall in the Indian telecom market. VI empowers customers to customize benefits according to their preferences, fostering a strong brand proposition. Initiatives to attract higher ARPU subscribers include facilitating the migration from 2G to 4G services.
• Extensive distribution & service Network: The company’s extensive distribution network comprised of 10,000+ distributors servicing ~787,000 retailers across India, as on December 31, 2023. The company owns and operates large format retail stores in Tier I cities, while the stores owned and operated by franchisees in other urban towns and smaller stores owned and operated by distributors in rural areas. As of December 31, 2023, the company had approximately 2,300 branded urban stores in India that included its own stores and franchisee-owned stores and covered over 95% of all districts in India.

Key Business Strengths

• ‘VI’ is one of the trusted brands with a strong proposition. The `VI’ brand has completed over three years, achieving recognition and recall in the Indian telecommunications market.
• The company has been backed by strong promoter groups the Aditya Birla group and the Vodafone group.
•  As of December 31, 2023, the company boasts over 223.0 million subscribers, capturing a 19.3% market share in India’s mobile telecommunications sector.
• It holds 8,005.2 MHz of spectrum across various bands, providing robust 2G, 3G, 4G, and 5G services to over one billion people across India.

Key Risks to Business

• The company’s auditors highlighted a significant uncertainty regarding its ability to sustain operations, prompting concerns about its financial stability.
• If the company fails to update its technology or match consumer preferences, it risks losing market competitiveness, negatively impacting its operations and financial health.
• Declines in key service areas like Maharashtra, Gujarat, and Mumbai could harm revenue.
• Providing telecommunications or related services that are technologically up-to-date and keeping up with changing consumer preferences are essential for the company to remain competitive.
• Regulatory changes and spectrum allocation may alter licenses, raising costs and limiting growth.

Fisdom Research Assessment:

We believe that while fundraising efforts could boost Vodafone Idea’s infrastructure, the company grapples with financial challenges. Unlike its competitors, Vodafone Idea has witnessed a continuous decline in its user base along with profitability. Investors should carefully approach this FPO and can get much better options to generate good returns. Though potential tariff hikes in future could provide a short-term boost to cash flows, its long term prospects remains questionable. Also, it is important to remember that the company’s promoters previously indicated a lack of funds and expressed a preference to close the company. Such statements contradict the interests of shareholders.

Offer Details