Analysts wary of Vodafone Idea's falling subscribers, broadband users

Vodafone Idea’s (Vi’s) subscriber loss reduced to a seven-month low in March, and alongside the company added 1.1 million broadband users after two months of net loss -- two things analysts have noted as key trends that need to be monitored.

While Vi has been losing customers for more than two and a half years now, the churn reduced to below a million after five straight months in March, the Telecom Regulatory Authority of India (Trai) data has shown.

“Jio’s softer than usual subscriber growth in March, and VIL’s slowing subscriber market share loss are key trends to keep an eye on going forward,” global investment banking and financial services major UBS said in an analyst note.

While Reliance Jio has continued to strengthen its position in the Indian telecom market, its subscriber addition fell in recent months.

The telco gained 2.14 million users in March.

However, this was lower than the 3.59 million and 4.17 million users the company had acquired in February, and January, respectively.

“While Jio continued to lead with 2.1 mn net adds, this was a relatively (soft) growth vs the trend of the past 12 months.

"On the other hand, VIL had the lowest subs loss since Sep ’23,” it pointed out.

Meanwhile, Jefferies said Vi’s recent fund raise could have a bearing on its subscriber addition in the future.

It stressed Vi’s 1.1 million subscriber additions in the wireless broadband segment is positive, but “needs to be monitored before arriving at any definitive conclusion of stabilisation on this front”.

“VIL lost 0.6 million active subscribers in March 2024, losing subscribers for the fourth straight month.

"Moreover, VIL lost active subs in 15 out of 22 circles, indicating continued pressure on subscriber retention.”

Possible slow recovery

While analysts continue to adopt a wait-and-watch stance with regard to Vi’s potential turnaround after its successful Rs 18,000 crore follow-on public offer (FPO), some have changed their recommendation for Vi stocks to “hold” from “sell”.

Last week, analysts said the FPO reinvigorated the sector and might reduce the massive loss of subscribers and market share experienced by the financially beleaguered telco.

On Monday, ICICI Securities forecast VIL’s cash earnings before interest, taxes, depreciation, and amortisation (EBITDA) to grow at a compound annual growth rate of 3 per cent over FY24–28E on a low base.

“This assumes VIL is able to grow its subs base, and grab higher incremental Adjusted Gross Revenue (AGR) market share,” it said in an analyst note.

However, it also pointed out the valuation was generous, and was based on FY27, which accounted for two tariff increases.