Mumbai: Vodafone Idea Ltd's recent tariff hike will not be enough to make it cash-flow positive, said Kotak Institutional Equities. The brokerage house has also continued to keep its rating for the company's shares suspended.
Earlier this month, telecom providers, including Vodafone Idea, raised tariffs by up to 45%.
The telecom operator's free cash flow will remain negative even if it has an average revenue per user of 180-190 rupees in 2024-25 (Apr-Mar), the brokerage house said. The company's ARPU was 107 rupees in the quarter ended September.
For Jul-Sep, Vodafone Idea reported a consolidated net loss of 509.2 bln rupees--the highest-ever by a company listed in India--due to provisioning for adjusted gross revenue.
"Even after the recent round of tariff increases, we are still dealing in extremes...to be positive, one needs to assume not just some relief on the AGR payout amount but also a spread-out payment construct and at least a couple more rounds of meaningful price increases in the next 2-3 years," the brokerage house said.
The brokerage house has raised the company's operating profit estimates by 35-60% for 2019-22 following the price hikes, but not assigned a rating or target price for shares.
Kotak Institutional Equities has, in fact, lowered its subscriber assumptions for the company noting weak competitive position on the network quality front barring a select few geographical areas.
Today, shares of Vodafone Idea closed more than 1% lower at 6.30 rupees on the National Stock Exchange.
