Vodafone Idea FPO: Price Band, Lot Size and Other Key Details

Vodafone Idea - About the Company:

Vodafone Idea is the third largest telecommunications service provider in India based on subscriber base. The company operates under a strong brand with over three decades of experience from Vodafone and Idea. It provides voice, data, and value-added services across 2G, 3G, and 4G technologies, such as short messaging and digital services for enterprises and consumers. According to the GSMA Intelligence Database, it is the sixth largest cellular operator globally in terms of number of subscribers in a single country of operations. Through the pan India network, it offers voice, data, enterprise, and other value-added services (“VAS”), including short messaging services and digital services across 2G, 3G, and 4G technologies. It also offers connectivity services to enterprise customers.

The company holds active licenses for national long-distance (“NLD”), international long-distance (“ILD”), internet service provider (“ISP”), and registration for infrastructure provider (“IP-1”) services. For the quarter ended December 31, 2023, the applicable gross revenue (“ApGR”) market share was 17.79% of the Indian mobile telecommunications services industry (Source: TRAI Financial Data). As of December 31, 2023, Vodafone had over 223 million subscribers and a subscriber market share of 19.3% (Source: TRAI). Furthermore, for the quarter ended December 31, 2023, it carried approximately 401 billion voice minutes and approximately 6,004 billion MB of data on its network.

Vodafone Idea FPO Details:

Objectives of Vodafone Idea FPO:

The company intends to utilize the net proceeds of the fresh issue towards:

• Purchase of equipment for the expansion of the network infrastructure by setting up new 4G sites, expanding the capacity of existing 4G Sites and new 4G sites, and setting up new 5G sites
• Payment of certain deferred payments for spectrum to the DoT and the GST thereon, and
• General corporate purposes.

Key Strengths and Opportunities:

• The company is the third-largest telecommunications service provider in India based on subscriber base. As it continues to expand its broadband coverage and capacity, the large subscriber base provides a platform to communicate effectively and utilize data and analytics to enable personalization at a large scale. This also enables it to upgrade the voice-only customers to users of data services and a large array of digital offerings thereby maintaining the competitive position in the market.
• It has a large network infrastructure of 2G, 3G, and 4G equipment, along with a nationwide fiber optic cable network. The targeted capital expenditures in 17 priority service areas reflect the company’s commitment to improving population coverage and competitiveness through augmented 4G coverage and the introduction of 5G technology. It has completed the minimum rollout obligations in four service areas of Maharashtra, Delhi, Tamil Nadu, and Punjab, by collaborating with original equipment manufacturers (“OEMs”).
• Vodafone Idea’s 4G network has been strategically deployed with a future-proof architecture. All the new basebands and radio units are 5G-ready with 10G bandwidth capability. The pan-India core network is also fully equipped to support 5G non-standalone (NSA) technology. This advanced network architecture is designed to handle the high throughput and diverse use cases associated with 5G, encompassing both mobile and enterprise segments. The company is committed to continually enhancing the network infrastructure to meet the growing demand for data connectivity and providing 5G technology to its customers and aims to cover 40% of its existing revenues in the 24 to 30 months post funding.

Risks:

• The audit and review reports issued by the statutory auditors of the company contain a paragraph on material uncertainty relating to going concern. There can be no assurance that any similar observations or remarks will not form part of the financial statements of the company, or that such remarks will not affect its financial condition.
• The telecommunications industry is characterized by technological changes, including an increasing pace of change in existing mobile systems, industry standards, customer demand and behavior, and ongoing improvements in the capacity and quality of networks. Deployment of new technologies such as 5G and 6G involves significant additional resources and capital expenditure. If the company fails to provide telecommunications or related services that are technologically up to date or keep up with changing consumer preferences, it may not remain competitive, and the business, prospects, results of operations, and cash flows may be adversely affected.
• The company has incurred significant indebtedness and has not complied with certain covenants under its financing agreements. The inability to meet its obligations, including financial and other covenants, under the debt financing arrangements could adversely affect the business operations and financial condition including the cash flows of the company.

Financial Snapshot:

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Conclusion:

Bharti Airtel and Bharti Hexacom Ltd, the listed peers of Vodafone Idea are trading at a P/E ratio of 64x and 81x respectively. Since Vodafone Idea has been making losses in the past Fiscal years, the issue is at a negative PE and thus, cannot be compared. This makes the FPO highly-priced when compared to its peers that have a track record of reporting a positive bottom line. Taking these factors into consideration along with the financials and current market conditions, we advise our investors to consider subscribing to the Vodafone Idea FPO solely for potential listing gains.