Vodafone Idea Limited (IDEA) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q1 FY '27 Results Conference Call hosted by Vodafone Idea. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Kishore from Vodafone Idea. Thank you, and over to you, Mr. Kishore.

Thank you, Darwin. Good afternoon, and a very warm welcome to all of you. Thank you for making the time to be here today. On 10th August 2026, our Board of Directors adopted the unaudited results for the quarter ending June 30, 2026. All the results related documents are available on our website. I hope you've had a chance to go through the same. Our robust quarter 1 FY '27 operating and financial performance has been endorsement of our well-defined strategy, superior execution. Let me share our progress on the key strategic initiatives, after which I'll hand over to Tejas, who will share the details on the company's financial performance. I would like to begin by updating you on 7 critical business parameters that we had mentioned in the last earnings call as well. I'm happy to share that all 7 of these critical business parameters are now trending positively. Our revenue improved 6% Y-o-Y to INR 11,689 crores while cash EBITDA demonstrated double-digit growth of 13.5% stood at INR 2,475 crores. We also increased our subscriber base to 193.1 million of customers vis-a-vis last quarter. Net subscriber addition, which turned the corner February last quarter has continued its trajectory. We delivered our first quarter of positive net subscriber addition since merger, we will continue this momentum. Our churn reduced by 24 basis points year-on-year this quarter. We remain focused to reduce our churn with the sustained network investment as well as get a competitive share of quality gross additions as we expand our coverage and enter new geographies. We also added nearly 3,000 unique broadband towers during the quarter and over 15,600 new sites over the last 12 months, expanding our pan-India 4G coverage 87%. On 5G, we have made substantial strides by expanding our footprint significantly. I'm pleased to share that our 5G services are now live in over 200 cities across all our 17 circles that we have 5G spectrum. Our disciplined execution and commitment to deliver clear network experience has yielded robust progress despite prevailing geopolitical headwinds impairing the CapEx deployment quarter 1 FY '27. Our customer ARPU grew from INR 177 in Q1 FY '26 to INR 195 in quarter 1 FY '27, a growth of 10.2% year-on-year, highest in the industry and a sequential improvement of 2.6%. The customer ARPU has now been increasing for 20 consecutive quarters. Customer ARPU expansion over the last year has been driven primarily by premiumization, which is evident from our improving 4G, 5G subscriber mix stood at 67.4% in quarter 1 FY '27, up from 64.4% in quarter 1 FY '26 as well as higher data usage by per broadband subscriber. We closed this quarter with 130.1 million 4G, 5G subscribers up from 127.4 million quarter 1 FY '26. Our focused execution has also translated better customer engagement as reflected in data usage. The average data usage by a 4G, 5G subscriber improved 25.2% year-on-year to 21.7 GB in quarter 1 FY '27. Overall, as a result, our data usage since quarter 1 FY '27 increase year-on-year by nearly 28%, 88.4 petabytes per day from 69.1 petabytes per day quarter 1 FY '26. These crucial business parameters clearly reflect that the customers are getting a better network experience since we have sustained investments and continue to remain engaged.

Sorry to interrupt, sir. This is the operator. Sir, the line is getting slightly unclear for you. May I try reconnecting, you, sir?

Yes.

Sure. Give me 1 moment, please. Thank you. Ladies and gentlemen, we have now reconnected with the management. Over to you, sir.

Okay. So just to kind of cover that we've just spoken on all the 7 critical parameters, which is all moving in the right direction. Moving on to the funding and its mobilization through CapEX, on the funding front, we have 2 important updates. First, on the warrants, we have received INR 1,183 crores as part proceeds from the issue of warrants to our promoters Aditya Birla Group. Second, I'm delighted to share that we were assigned Crisil A-/(Stable) rating by Crisil in May 2026, followed by a credit rating upgrade to ICRA A-/(Stable) by ICRA in June 2026. The ratings were assigned and upgraded by Crisil and ICRA, respectively, a certain long-term bank facilities considering the positive development over the last few months. I also want to update on the broader financial architecture that supports our CapEx plan of INR 45,000 crores over the next 3 years. This architecture is built on 3 cohorts. First is the consortium of public sector banks led by SBI with 6 to 7 participating banks. Second cohort is of the Indian private banks, and the third one is of the ECB with foreign banks. We remain meaningfully engaged with our lenders across these 3 cohorts and have made substantial progress with them. I'm happy to share that we have successfully raised our first tranche of funding INR 6,400 crores, including partial proceeds of INR 1,183 crores from warrants and debt proceeds, including nonfunded based facilities through ECB and Indian Private Bank. We have already placed orders worth INR 9,000 crores CapEx till now, which also includes the CapEx undertaken in quarter 1 FY '27 of INR 1,930 crores. The supplies and execution basis these orders have already come in and will continue. We are now focused on accelerating network expansion, ease fresh orders to Ericsson, Nokia, Samsung and other partners which will be executed as we move forward. We are hopeful of closing the discussion with the PSU banks led by SBI as well as continued work on other debt-raised streets. Next, our differentiated product offerings and market initiatives. Our focus is on enriching customers' digital lifestyle with experiences that extend well beyond just voice and data. Towards this, we partnered with Spotify to offer our postpaid Vi Max subscribers a premium music stream experience. For prepaid subscribers, we launched Vi Edu+, a co-branded nonstop hero proposition in partnership with PhysicsWallah of Uttar Pradesh and Rajasthan, combining unlimited connectivity, digital learning benefits for students. We also launched Vi InstaData nationally, an emergency dataset giving eligible prepaid users 1 GB extra data instantly if their daily data limit drops below 10 MB with 2 days of validity adjusted from their active plan. We further strengthened the international roaming portfolio, the launch of Choose Your Own Plan, which offers subscribers greater flexibility to a wider range of validity, enabling them to those choose plans best suited their travel requirements. Our truly unlimited roaming plan is now available across 59 countries. We also partnered with Meta to enable silent mobile verification across Meta platforms like WhatsApp, Facebook and Instagram, enabling safer, seamless and passwordless digital experience for millions of users. We are creating seamless authentication experience across some of the country's most widely used digital platforms. Our proactive identification migration solutions SPARK was built on strengthening Vodafone Idea cyber resilience. We are now upgrading AI-led early detection. These advancements strengthen our innovation, ensuring we stay ahead of emerging threat. Our recent brand camping, everyone is priority, reemphasized a larger belief that every customer deserves an optimal network experience, further strengthening brand differentiated business. Moving on to our enterprise business. Vi business continued to strengthen its position as a trusted enterprise partner through a comprehensive portfolio of future-ready digital solutions, backed by robust 5G infrastructure and a growing ecosystem of a strategic technology partnership. During the quarter, demand for Vi business solutions remains strong of connectivity, cloud, IoT, business communication, mobility and cybersecurity driving increased enterprise adoption across key sectors, including BFSI, manufacturing, utilities, logistics and govenment. We also unveiled MSME Ready for next 5.0 on World MSME Day 2026, the latest addition of India's largest digital advisory platform for MSME. Vi business signed the memorandum of understanding with Andhra Pradesh MSME Development Corporation, digitally empowered over 1 lakh SME in the state. We believe the telecom industry is well positioned for growth and the need for connectivity is driven by fast-growing economy, a growing and younger population, driving technology adoption across all age groups, lower rural density. Our improving trend, the recent positive development gives us increasing confidence in our ability to participate in the industry's growth story. With that, I'll hand over the call to Tejas, our CFO, for the financial commentary. Thank you.

Thank you, Abhijit. Good afternoon, everyone. We continue to witness improving trends across key financial and operating metrics. Last quarter, I highlighted that the average daily revenue was the highest in the last 6 years. We have now sustained that momentum with another quarter of revenue growth. The revenue for the quarter was INR 11,689 crores, registering Y-o-Y growth of 6% and a 3.2% improvement on a sequential basis, driven by ARPU expansion. The EBITDA for the quarter crossed INR 5,000 crore mark and reached INR 5,034 crores, improving by 9.1% Y-o-Y. The EBITDA margin improved by over 120 basis points from 41.8% to 43.1% in the same period. The cash EBITDA for the quarter improved by 13.5% to INR 2,475 crores versus the same quarter last year. The cash EBITDA improved despite the rollout of over 15,600 broadband sites during the last 12 months, reflecting a focus on overall cost management. Depreciation and amortization expenses and the net finance cost for the quarter INR 5,467 crores and INR 4,925 crores, respectively. Excluding the impact of Ind AS 116, the depreciation and the amortization expense and the net finance cost for the quarter was INR 3,862 crores and INR 3,701 crores respectively. Additionally, we also recorded a benefit of INR 1,816 crores in the exceptional items on account of the fair value adjustment of the earmarked shares from CLAM. This remeasurement of fair value will be undertaken every quarter, and its impact adjusted an exceptional item till the shares are liquidated. Due to the supply side issues arising from the geopolitical constraints, the CapEx investment for the quarter was INR 1,930 crores. And as Abhijit has guided, we tend to accelerate our network expansion towards which we have already placed orders with our partners. Our bank debt has reduced to only INR 211 crores as of June 30 from INR 1,926 crores as of June of the prior year, a reduction of INR 1,715 crores in the last 12 months. The free cash and bank balance as of June 30 stands at INR 6,558 crores. Our recent credit ratings and the continued promoter support have been a significant catalyst for ongoing debt conversation, which further strengthen our conviction in the execution road map laid by us. I would like to hand over by reiterating that this quarter's results reflect our growth momentum, translating into improving operational and financial performance and the highlight being net customer addition for the first time since the merger. With that, I hand the call back over to Darwin. Thank you.

[Operator Instructions] Our first question comes from the line of Sanjesh Jain with ICICI Securities.

A couple of questions from my side, Abhijit. First on the subscriber transition and the benefit of the network, how should we see from here on, particularly on the mobile customer how should it translate and what has been the trend in the circles now that we have implemented CapEx in last 1 year? Have we seen those circles turning positive in terms of mobile subscriber net adds?

Yes. So just your kind of -- you have more questions, then I can take all of them? Or do you want to respond right now?

No, I will -- so second on ARPU, we have been bridging the ARPU gap versus the peers. How much more do you think it is possible before the transition of 4G and 5G really helps push the ARPU growth? How much more is it possible by improving the efficiency within the network to take the ARPU to, say, next 1 year, what are we targeting? That's number 2. And number 3 on the CapEX, we said that we have put up INR 9,000 crores of CapEx. We have already invested close to INR 2,000 crores in this quarter. By spending this INR 9,000 crores, INR 10,000 crores this year, where do we see our network capacity in terms of expansion from the current level?

Okay. So thanks, Sanjesh, for asking me that question. Okay. So let me take the first one. On the subscriber addition, the answer is clearly yes. We look at it at different cohorts on all these 17 markets that we have defined for ourselves and obviously, where we are putting the network in the rural as well as in the urban markets. This club will be 5G wherever we have we rolled out. We clearly see a difference on the customer retentivity, which is what I spoke of, of 0.24% that we see over the last year, which is improving. This is visible across the circles. Obviously, as I say, the journey continues. We have put 15,500 sites in the last 1 year and 32,000 sites on 4G in the last 2 years, and we see a significant delta being placed. But the journey continues, and we still have where we need to put our 4G sites as and when we are putting the 4G sites and the 5G sites, we clearly see. So that's the one. Second is, obviously, as we said, this is the first quarter for us on the subscriber addition to be positive largely led between postpaid and M2M. Prepaid is also turning leave, and we see a clear and significant in spend churn quality of the gross acquisition that we acquired now. So it's all pointing in the right direction. As far as the ARPU is concerned, as I said, we've kind of grown by 10%. We expect to keep the same momentum. This is obviously organic ARPU growth, which is where we have a differentiated opportunity between the mix of customers of between 2G and a 4G, 5G as well as unlimited voice and unlimited data customers and then between the unlimited data and the nonstop Hero which is a differentiated offering for us. So we continue, and we hope to see that we will continue the similar trend, a little better than where we are today on the ARPU of INR 195 at a blended level. On the CapEx, our guidance on the CapEx continues. We are looking at the INR 45,000 crores for the next 3 years, as we have said. The first quarter, because of the supply chain headwinds, we saw a little bit of a muted INR 2,000-odd crores of the CapEx spend. As I indicated, we have already placed the orders for [ INR 9,100 crores ], which includes the INR 1,930 crores of the CapEx, which has been deployed. We intend to deploy all of these CapEx over the next 2 quarters, less than 2 quarters. So the intensity continues. We are looking at deploying roughly around 3,500 sites a month on an average hereon.

3,500 you said is the tower count or the...

Tower count on the 4G.

Tower count on the 4G. Abhijit, 1 question on the postpaid. Now that the fast lane 5G is becoming a reality in India, do you see risk to your postpaid customer?

On the contrary, Sanjesh, I will say that we have seen an increase in our postpaid acquisition as well as retentivity. So as we speak, we don't see that as a challenge. However, we continue to provide experience and we have enough capacity to provide the experience to our customers, not only postpaid and prepaid equally.

Got it. Got it. Anything on the 5G, how many towers we have done? I know you said 200-plus cities. But some qualitative number in terms of tower coverage, that would be helpful.

Yes. So we are now -- as we speak, we are over 16,000 sites in 5G, and we intend to kind of cover another 200-plus cities over the next 2 quarters.

Our next question comes from the line of Aditya Suresh with Macquarie.

Two items. So first, Abhijit if you can like speak to us about your cash EBITDA targets, which you all had articulated a few months back. Can you like reiterate what the guidance is or what the ambition is over the next 3 years? And if you could break that down for us in terms of how much of that is going to be the top line versus margin expansion? That's the first item. The second item is a clarification. Could you clarify what is the position of net debt as of this quarter? That's one. And two is, within your subscriber number, how much of these subscribers are in that M2M category?

Sorry, Aditya, if you could just repeat the second question. You said what is the net addition?

No, no, sir, what is your current net debt position? And also, if you can clarify on your M2M subscribers.

Okay. So I'll take the first one first, and Tejas, you can chime in. So on the cash EBITDA, we had a INR 9,200 crores of cash EBITDA last year. We are at INR 2,575 crores this year. I think our guidance for the next 3 years was 3x of the cash EBITDA, which is obviously built with certain assumptions on the organic as well as some of the price corrections which will happen. That guidance continues, and we are moving in the right direction as far as that is concerned. So that was obviously built over a customer as well as on the ARPU. So that guidance continues clearly. On the top line, when we had looked at the total cash EBITDA of 3x, we had taken a guidance of a CAGR of around 16.8% for 3 years, which also continues as we speak. On the net debt, as Tejas said, we started the year with INR 700-odd crores of the bank debt that we had. We've made a payment of INR 500-plus crores this quarter. And as we stand today, we are at INR 211 crores of the bank debt. In addition to that, we have taken the NCD borrowing of INR 3,300 crores. That's the debt that we have. So from a bank debt point of view, it is INR 211 crores, from the NCD which we had raised in the month of December last year, that's INR 3,300 crores. So that's the only debt that we have. On the M2M, I think it's a good story. We're kind of seeing good traction in all the 4 verticals that we play, be it automatic meter reading, vehicle tracking, connected car as well as point of sale. We see a good traction and over the last 1 year, we have actually doubled our net addition as far as the machine-to-machine is concerned, and that trajectory is a very strong trajectory. We have a pretty dominant position in the connected car space as far as the IoT is concerned.

Just Abhijit has clarified just open net debt for the quarter, we are ending at INR 3,489 crores. So that's the 2 constituents that Abhijit mentioned and that was INR 4,001 crores in the last quarter.

And can you just clarify the subscriber base in itself on M2M?

We don't give the breakup, Aditya, on that. As I indicated that the postpaid as well as the M2M is tracking pretty well. Prepaid is there, we have a job to do and that's where the focus is now. As we roll out more and more sites, we are reaching to the places where we don't cover today, and that's the focus area.

Our next question is from the line of Gaurav from Axis.

Yes. I just had a couple of questions. One is on your network OpEx. That number has sort of remained broadly stable in the last few quarters, even though your network has obviously sharp improvement. So how should we sort of think about this going ahead?

Thanks for the question. I think we had a similar question also on the previous quarter. So I think 2 ways to answer. I think as we look at our cost efficiency effort, we will look at bringing efficiency into a network cost. So yes, while you said, we have been rolling out additional sites. We have been able to, in a way, manage the overall network cost. Having said that, we have seen some inflationary challenges from diesel, et cetera. So you might see a little bit of that. But overall, I would say we've been able to offset some of the increases with internal efficiency and some of it probably might get reflected in the coming quarters. But last 2 quarters, we have been able to offset that internally.

Understood. The next question is on your roaming access charges. That has seen a sharp increase. So is there anything related to some intra-circle roaming? Or how should we sort of think about this?

No, I think nothing to do with the intra-circle roaming and nothing structural. Like any business, there are a few lines of business that we have. We have a wholesale line of business, which in this quarter, we have seen a better participation. And that comes with a higher roaming cost. If you will see the same line in the prior quarter, that was a little bit lower. So on an average, if you see the increase is not that high. And again, it's a cash accretive business, slightly higher cost than a lower percentage margin, but an overall cash accretive business that was -- we were able to participate higher in this quarter.

Our next question is from the line of Balaji Subramanian with IIFL.

Congrats on a decent set of results. I just had one. So if I look at the postpaid additions, they are at a multi-quarter high, but I can also see that a lot of that is probably led by M2M. So if I look at the TRAI number, the 2 million M2M subscribers were added in the June quarter. So that means there was a slight dip in the postpaid subscriber base ex-M2M in the June quarter, which is probably after 4 quarters of positive additions on the postpaid ex-M2M trend. So have you got anything to do with -- I know this question was also touched upon earlier, but has it got anything to do with the priority plan Airtel Fast Lane that was recently launched by Bharti. And do you see that as a risk because postpaid is where Vodafone has been fairly strong. And we also saw that in the quarter that went by Bharti's postpaid additions crossed the 1 million mark for the first time. So how would you kind of plan to face off this challenge. That would be my only question.

Yes. No. Thanks, Balaji, for asking that question. No. So we have not seen, as I said, even to Sanjesh, we've not seen any dip in the postpaid business. Even the net addition for us in postpaid has been consistently over the last 6 to 8 quarters been positive, and it's growing. There's no dip that we have seen at all. As far as the M2M is concerned, clearly, there is an increase in quarter 1 over the last quarter, which is where you see the increase in the M2M part. Both these businesses are pretty stable business and a net addition positive business for us. So we don't see that. That's one. Second, as I said that our focus from the retail stores that we have. We have 2600-plus retail stores in 650-plus towns, where we have Vi stores and Vi mini stores. Of these stores, we don't see any dip whatsoever across the country as far as this business is concerned. I would not want to comment on what competition plan is, but we don't really see anything. And on the contrary, we are adding subscribers.

Our next question comes from the line of Saurabh Handa with Citigroup.