Vodafone Idea Limited analyst Q&A

Thank you. We will now begin the question-and-answer session. The first question comes from the line of Rishabh Dhancholia with HSBC. Please go ahead.

Hi. Good afternoon and thanks for the opportunity. A couple of questions please. Firstly, on the subscriber trend. Subscribers actually increased quarter-on-quarter. What drove that? Are you seeing any churn out to BSNL because BSNL re ported gross subscriber addition for the month of August to September as per TRAI actually improved. In the area where you have rolled out 5G, how has been the subscriber traction and are you seeing lower churn in those areas? Secondly, on Capex, what is the outlook on Capex for second half of the year and how much of it is dependent on the additional capital raise? Thank you.

Rishabh, I will just take your question one by one. I will start with the first one that you said on the subscriber loss. Yes, you are right. There has been a marginal drop in our overall subscribers. If you look at the trend from a long-term point of view, over the last couple of quarters, we have been sequentially reducing our churn from 5.2 million to 1.6 million to a 0.5 million last quarter which has increased to a 1 million subscriber loss this quarter. There is some bit of seasonality impact as well, but the fundamentals of the business are intact and we do not see ourselves making any changes to our long-term view as far as the subscriber is concerned. Also, we continue to see the 4G and 5G devices addition on our network as we are rolling out more and more 5G sites and 4G sites. We also see a clear positive and a stable growth coming from the areas where we have invested. We have been saying that while we have increased our coverage from 77% to 84%, our endeavour is to take it to 90% and those are the areas where we will keep moving. The other thing which has also helped in better engagement and retentivity of our customers are the propositions that I have spoken about, the’ SuperHero’ and the ‘Non-Stop Hero’ Plans, which are seeing a very good traction for us, including the ‘Vi Guarantee’ Program. The data usage per customer, has increased to 18.5 GB/day, is also a testament to the fact that the customers are actively involved and engaged in our business. Coming to your second question that are we seeing any additional churn to BSNL, I do not think we are seeing that., As I said, it is more seasonality and marginal impact that we see in this quarter, and we are not changing any long-term view. On the capex for the H2, we have spent Rs. 4,200 crores towards capex in the H1, and our guidance is that we would be in a position from a year-on point of view, roughly in the range of Rs. 7,500 crores to Rs. 8,000 crores of capex by the end of FY26. We are not really looking for any external funding for this particular capex, which is part of the internal accrual as well as the money that we have. Our focus continues to be expanding 4G and 5G coverage.

Mr. Dhancholia, are you done with your question?

Yes. Just a follow-up on the subscriber trends. You mentioned that you have not changed your outlook or long-term view on subscriber additions. Any guidance as to when can we see positive subscriber additions or subscriber churn turning around? Any guidance on that?

We are keeping the customers engaged as far as our product proposition and network enhancement are concerned. Our challenge has been to extend coverage that we have not been able to do. We firmly believe that the more sites and the more 4G and 5G sites that we roll, we will start to see this trajectory inflecting to positive.

If I may, one follow-up on the Capex. You said we plan to do Rs. 7,500 crores to Rs. 8,000 crores of Capex this year. Where will this take us in terms of unique sites? We are at around 197,000 unique sites right now. Where do you think we will land up after spending this amount of Capex?

Rishabh, the way we look at it is a combination of the 4G - 5G layer addition, as well as some bit of core and transmission. It will be difficu lt to give a forward-looking statement on the number of sites, but it will be a mix between a 4G and 5G on the radio and some bit of it on the transmission and core.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Sanjesh Jain with ICICI Securities. Please go ahead.

Yes. Good afternoon and thanks for taking my question. I have got a few of them. To start with the data, data customer which saw a decline while we had growth last quarter and if I look at the last 12 months, we have added close to 90,000 BTS there on the mobile broadband side. Now, when should we expect some traction here in terms of consistent growth coming in. If you can also help us understand how are the circles growth, where we did the capex early in the cycle to just understand how can we see that traction coming in as the other circle also mature in terms of coverage.

Sanjesh, thanks for the questions. There are two parts to the question that you are saying. One is on the data subscribers that you said. We have added 4 lakh customers this quarter as far as the 4G/5G subscribers are concerned and we have also, explained earlier, launched two very good and engaging propositions on the ‘SuperHero’ and the ‘Non-Stop Hero’ Program. We see that the customers are getting engaged and the data us age per customer is going up. Yes, the data customer growth is also linked to these overall subs churn coming down and hence that is one action item for us. Second question that you asked is on the areas where we have invested early. We are clearly seeing better traction there because as and when the customers are using our services, obviously, they are getting a very differentiated experience both on the network as well as on the product proposition . We are hopeful that this curve w ill turn to the positive territory soon for the subscriber as well as the larger customer on the data subscriber addition.

Abhijit, thanks. But still can you help us understand some of the circles like Mumbai and all where we invested. How is the traction there in terms of getting the subscribers on the broadband side?

I mean, not specifically naming Mumbai or Delhi for that matter but in the circles where we have invested early, we clearly see better traction and lesser churn. . We see higher engagement as far as data usage is concerned and we also see better traction in customer acquisition. The earlier part of our investment has gone into some of the urban areas and there we see a clear traction, where we see much better retentivity and engagement of our customers.

Got it.

I do not want to get into a circle level discussion, but at a national level, we clearly see that trend and obviously it is emanating from the fact that we have done early investment in urban market.

No. That is what I said. If I look at the country as a whole, which is the subscriber we disclosed, that at least after a last quarter acceleration, we have seen a deceleration in this quarter. But you mentioned it is purely a seasonal factor?

Yes, but it is more a seasonal factor that we see and we are confident that we will come back as far as the delta is concerned on the customer loss.

Got it. Now, second question on the customer engagement itself. If I look at the data usage per customer on our network versus the peers’ network, we are at 18 GB, they are at 28 GB per month. We need to build capacity both in term s of user behaviour being similar to the peer network and then we need to add the customer. So, how are we planning in terms of expanding the capacity? So, that is number one. Number two, peers have the advantage of having their 40% or more of the data running on 5G network, where the capacity is higher. So, they can still carry those data on the network. Now, we are very initial phase as far as 5G. Now, how will we tackle this issue of creating capacity experience and then growing?

So, Sanjesh, the first question on the data usage growth, you are right. We are at 18.5 GB/day, but the way we look at it from where we were and where we have reached has been a significant jump because we had not been investing for some time. In the last couple of quarters, the investment has just started, and we see a significant jump as far as, data usage is concerned aided by better network experience as well as the product proposition. That is the first part on the data usage. Secondly, from a capacity utilization point of view, we have enough headroom right now in the both 4G as well as the 5G network because 5G, as you would know, we have just launched in the last two quarters. Then the third part is hi storically, this difference has been there between the competition as far as the delta on the data usage concerns. It is a combined impact for all of that. But if you were to look at the data usage increase on our network, we have had an increase of over 20% over the last one year, which is a clear reflection of our improving subscriber engagement. Our current focus is to enable more and more subscribers to experience the improved network, and hence some of the product propositions that we have launched, which is unique, are actually addressing that need.

Fair enough. Just one question on 5G. It has been two quarters for us launching 5G. We start 5G at 1.5 GB data plan, unlike peers who started 2 GB. Any plan for us to move to a 2 GB so the premiumization effect keeps start playing even on our ARPU from the 5G?

When we had launched 5G, we had started with an introductory offer of a Rs. 299 and 1.5 GB, which we have now, in the markets where we have launched 2-3 months ago, we have changed the tariff to Rs. 349. If you see the competition’s pricing, it is between Rs. 349 and Rs. 379. We have moved to that price range, in areas where we launched a couple of months back.. But in some of the markets, as you would know, out of the 29 cities that we have 5G in the 17 circles, 24 of them have come in this quarter itself. So, as and when we see a critical mass of a customer coming on to our 5G network, we will see how do we upgrade and monetize better.

Abhijit, what is the subscriber count on 5G for now as we speak, or end of the quarter?

Got it. One on the capex, now that we have some more time in terms of raising capital, how do we plan to prioritize the capex, what we are doing right now? Will it be more capacity creation over the coverage? That is how we should look at it?

I would say it will be a mix of both. But it w ill be more towards coverage, because we have enough capacity as we speak and within the coverage, it will be between the 4G and 5G. So, that is the way I will put it. We will need to put some bit of it on the core and transmission as well. It will be a fair mix of all, but it will be more towards the coverage between 4G and 5G.

Thanks. One last bookkeeping question. There was a sharp drop in the finance cost in this quarter. Was it to do with that now the interest on the moratorium stops, because we are out of the moratorium period? Is that the reason, or is there anything else in the drop in the finance cost?

Tejas, do you want to take that?

Sure. Thanks for the question. No, it is not to do with the moratorium. There have been some settlements with some various vendors, on account of which we have made some provisions in the previous quarter that are now reversed, and also a slight favorable impact on lower forex fluctuation, which has contributed to the decrease in the interest cost.

So, Tejas, what should be the underlying finance cost on a steady state basis for us?

I cannot give you exact numbers, but more like previous quarter.

More like Q1 or it is more like Q2?

Yes. Broadly there. There will be some differences, but broadly towards that prior quarter.

Prior quarter. Average of the two prior quarters will be the numbers you work with, right?

Yes.

Got it. Thanks. Thanks for all those answers, and best of luck for the coming quarters.

Thank you.

Thank you, Sanjesh.

Yes. Thank you for the opportunity. Firstly, on the pending fund raise, I have two questions on this. Firstly, do you think banks, now that you must have been, for the discussions with them over the last couple of weeks, do you think they will be waiting for, an official relief package from the government, which I suppose could take a few months as there are no repayments due before March? Or could this be independent of when the relief package comes, now that we do have a Supreme Court verdict? And just secondly, on this, what is the status of raising credit from non-banking sources that you have previously spoken about? Is that something where timelines could be advanced? Thank you.

Okay. So, Saurabh, I will take the first one and will request Tejas, do it for the second one on the rating credit from the non-banking. So, on the first one, on the fund raising, as you rightly said, we are engaged with the banks and with the recent development of the Hon’ble Supreme Court’s order, it is clear and the government being a 49% holder making it amply clear that, in the Indian context, three private players are required. We are looking at the solution wh ich we believe will be best answered with a long-term view from the government. Our sense is that since the Supreme Court order has come recently, there might be a little bit of a dependency on that from the banks when they are looking at extending long-term funding. But we are engaged with them and working closely, as and when we get to a solution, we will come back to you. Tejas on the question on the credit.

Sure. Saurabh, the current credit rating is BBB -. Maybe if you can elaborate your question.

Sorry. No. What I meant was you had spoken about raising credit from non-banking sources, I guess private credit. Yes. Can that be something which can be advanced ahead of, say, funding from banks?

Yes, Saurabh. We are talking to banks and NBFC s both, and as and when we get closer to the deal, we will come back to you. As we speak, we are engaged with multiple partners at this point in time.

Okay. Sure and just a second question, could you just remind us of the total quantum of AGR debt which is outstanding as of September, and within this, how much would be the principal portion?

The principal and the interest, we cannot share, but as of September ‘25, is around Rs. 79,000 crores - Rs. 78,500 crores of total amount on the AGR.

Yes. Thank you, Saurabh.

Thank you. Next question comes from the line of Sumangal Nevatia with Kotak Securities. Please go ahead.

Yes. Good afternoon. Thanks for the chance. Sir, my first question is with respect to our end goal of 90% coverage for 4G, what is the timeline we are looking at, and how much more Capex will be required to reach 90%?

We are right now at 84%, and our sense is that over the next couple of quarters, we should be able to get to 90%. I cannot really give you a finite timeline right now, and the approximate capex that is required, would be, in the range of Rs. 4,000-odd crores for the coverage between our 84% to our 90%.

Okay. So, a few quarters is where I think we can hit this end goal, right?

We are keeping the balance between expansion, getting population coverage, as well as keeping the 5G part intact. That is the reason we cannot really give you a finite time right now. But the endeavor is to get as soon as possible to 90% and bridge that gap.

Understood and Sir if you look at the trend on the subscriber losses, it is encouraging to see a declining trend. What is our sense? When do you see this reversing to a gain starting, I mean, will it be now closer to that 90% goal in few quarters, or in between only in this journey we should now expect a reversal from coming months?

It will be in a manner as I have said before. The reason that we need to accelerate our coverage expansion is to ensure that we give better connectivity to our customers and better experience in the areas that we have not covered. I will not say it is really linked to getting to that 90% coverage, but it will be definitely have an impact. I cannot really give you a finite timeline on turning positive. I made the comment that the fundamentals are in place, we are looking at a better engagement of customers in the markets where we have invested. Our product propositions are parallel to other players, now we are working towards making the churn positive as soon as possible. I would not really want to link it to say when we reach only 90% coverage.

Understood and just one last question, with related to our discussion going on with DoT and the government with respect to AGR dues, what sort of timeline are we expecting in terms of some conclusion here? And against our Rs. 80,000-odd crores of dues, any thought process you can share? What is our ask with the DoT and the government?

So, Sumangal, we welcome the order from the Hon’ble Supreme Court and we are hopeful, government being a 49% player, to look at a long-term solution and we are engaged with the DoT. I cannot really give a timeline at this point in time on saying when will this get solved, but government has been extremely helpful, and we are very hopeful that it will be resolved as soon as possible.

Got it. Thank you so much and all the best.

Thank you, Sumangal.

Thank you. Next question comes on the line of Vivekanand with Ambit Capital. Please go ahead.

Hello. Thank you so much for the opportunity. My first question is on the 5G network. You are disclosing 4G capacity and there is also a disclosure from your side with respect to using March 2024 as the reference point from a capacity addition perspective. But I see that in your quarterly report and press release you talk about only 4G data capacity. It would really help us if you can share some additional KPIs with respect to 5G network rollout like additional capacity created and number of sites. That is one ask from my side. The second one is the two circles where you rolled out 5G roughly two quarters back. Is the 5G network now handling a large part of your traffic? Are there any indicators you can provide here? Those are my questions on the 5G network. I will ask my other questions afterwards.

Okay. So, two parts to the question that you said. The reason why we look at the March ‘24 is because that is when our investment cycle started and hence that is a good benchmark when we were not investing and then when we started what is the kind of delta have we been able to create. Obviously, as you said, 4G data capacity has been increased by 38%. The second question that you asked on the 5G, why we do not share, it is an initial stage. As I said earlier, we launched Mumbai in the month of March and post that in this quarter we have launched in 25 out of the 29 cities that we have launched. It is too early to make any comment while we keep monitoring trend. In the two cities or the circles where we launched 5G, the answer is yes. We have seen a much better traffic offload as far as the network on the 5G is concerned.

Okay. Thank you for the color. We will wait for your disclosures on 5G in subsequent periods. Also, there are a couple of media reports that talk about you doing trials with alternative domestic vendors. Several are named by the media. And secondly, a topic which is unrelated, one of your competitors has signed an ICR with BSNL, so particularly in rural areas where the intra-circle roaming could perhaps help provide deep coverage. So, what are your thoughts on these two matters? And what can you discuss further to what is shared on media on both these topics?

I am not going to comment on what the media ha s written as far as these are concerned. Once our discussion fructifies, then it will be better for us to come back and talk to you. As we speak, there is no conversation that we are really having with anybody on the ICR at a BAU level. And the first question that you said on the other partners, everybody keeps exploring opportunity, which is what we are also doing, but there is no firm change of plan as we speak. Our partners from a network equipment point of view are what we have disclosed. So, there is no change as we speak, but from an evaluation point of view on the technical front, there would be some evaluation which we keep doing. Even the government would want the indigenous vendor, and hence we keep exploring that opportunity clearly.

Okay. My last question is on the technology upgrades and the debate on 5G standalone versus non-standalone. So, previously when you were talking about, say, your just-in-time capex strategy, you would highlight that you are able to take advantage of advancements in technologies even within the standards, right, whether it is 4G or 5G. And there, that would help you economize on your deployments. So, I want your thoughts, one, on this SA versus NSA debate on 5G, and secondly, is there a way for you to roll out your 5G network incrementally? Because I think, you mentioned that you rolled out in 25 cities, 30 cities. Surely there is a broad scope for you to roll out more 5G. So, is there a way you are able to now think about 5G rollouts in a more frugal manner given that you are late versus, say, incumbents who set up pan-India networks?

Yes. So, we are going to run two parts of the question that you are asking. One, obviously, on the 5G. At Vodafone Idea Limited, we have taken the route of NSA architecture and that is what we are rolling out right now. At the same time, I can also say that at any point in time that we decide to move to the SA architecture, our current architecture is capable of moving to SA. So, when we decide the need to migrate to SA architecture, we would evaluate and do that. As a second question of saying, how and where are we going to go? Again, the balance of capex for this year as well as going forward is going to be a fair mix of getting to a 90%, providing capacity in the markets where we decide that there is congestion and a fair bit of 5G as well.

Okay. Understood. Thank you so much and all the very best.

Thank you. Next question comes on the line of Aditya Bansal with Motilal Oswal Financial Services Limited. Please go ahead.

Thanks for taking the question. My first question is on the network updates about EBITDA levels. So, despite rollout on 4G as well as on 5G and also seasonality in terms of power outages, the cost above EBITDA in network has been held stable and lower than December ‘23 before it began. What extent is that?

Tejas, you want to take that?

If you look at our, network cost above EBITDA, right, and I am just looking at the variance and the trend over a longish period of time, you are ri ght, they are slightly flattish. Last quarter-on- quarter, we have increased only marginally. Year-on-year, it has increased more and that is from the investments that we have made in the network as Abhijit mentioned. Also, there is a benefit inherent with the cost optimization that we have spoken in the past.

Okay. But it has been lower than December ‘23 before you began rollout. So, that is why I was like checking out what could be the reason, is it more efficiency that you are driving, anything on the IT cost, etc.

We can take it offline, but there could be an IndAS 116 impact as well because there are some which are below EBITDA, but we can take it offline and cross check.

Sure and another one was on the non-wireless side of sales. So, revenue has grown very sharply this quarter there. So, is this a sustainable trend or was there any one of benefit is on the non- wireless side?

What do you mean by non-wireless?

Basically, your customer revenue and the subscriber base that you give out, so if I remove that from the reported revenues, so non-wireless or the enterprise revenue, that has increased by like 6% - 7% on a Y-o-Y as well as Q-o-Q basis. So, any particular reason there, or?

There is no extraordinary or one-time thing is what I can tell you on the trend. We have different businesses on messaging and other things, but ther e is no extraordinary item even in the non- voice or non-wireless that you are saying there.

From a tariff hike point of view, if you really ask us, obviously, it depends on, how the industry takes shape and how the leaders take the position on the tariff hike. Is there a requirement of a tariff hike? Probably, the answer is yes. How fast and how soon can that happen, we will wait and watch. I will not really link it to DoT and the AGR judgment on that.

Thank you. Thanks a lot and all the best.

Thank you.

Thank you. Ladies and gentlemen, that was the last question for today. Due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. Abhijit Kishore for closing comments.

Thank You Renju. As discussed during the call, our investments have led to improved coverage and enhanced customer experience. 5G services have been expanded to 29 cities in 17 circles. Our data usage has increased significantly by 7.8% QoQ showing increased engagement with our subscribers. We continue to keep exploring new avenues for debt funding for the execution of our long-term network expansion plan.

Thank you. On behalf of Vodafone Idea Limited, this concludes this conference. Thank you for joining us. You may now disconnect your lines.