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News Topical, Digital Desk : If you're considering buying Vodafone Idea (VIL) stock, the latest telecom sector report is crucial. The company is showing some positive signs—ARPU has increased, and EBITDA has also strengthened slightly—but subscribers are constantly attriting, and the company's debt remains high. JM Financial has maintained its ADD rating on VIL and raised its target to ₹12. This means there are both risks and opportunities—and it's important to proceed with caution.
While ARPU increased to ₹180 (1.7% QoQ) and EBITDA reached ₹46.9 billion, it also reported a net loss of 1 million subscribers. This is what investors are most concerned about, as subscriber growth and network quality are the driving forces of a telecom business.
(1) ARPU increased – VIL's ARPU is ₹180, but it still lags behind Airtel (₹256) and Jio (₹211). This means the company is lagging behind in attracting high-ARPU users.
Meaning for investors: ARPU improvement is in the right direction, but a significant re-rating will only happen if this gap narrows.
(2) But... the company lost 1 million users this quarter. In comparison, Jio added 8.3 million, Airtel added 1.4 million, and VIL is the only company consistently losing net subscribers. Meaning for investors: This poses a significant risk. A declining subscriber base limits the company's valuation.
(3) Data usage increased - User data usage increased to 18.5 GB/month. However, network quality and limited 5G rollout are preventing a sharp increase in earnings.
(4) EBITDA improved - but the debt burden is heavy - EBITDA increased 1.6% QoQ and margins reached 41.9%. However, the company's net debt is ₹1.94 lakh crore - this is the biggest risk. Meaning for investors: Without reducing debt, the potential for significant stock gains is limited.
(5) Lack of funding – 5G rollout also slows down – VIL's Capex declined from ₹24.4bn to ₹17.5bn, indicating that funding issues remain serious. Investor implications: Lower Capex means slower network expansion, and premium customer acquisition will be difficult.
Brokerage View – Target Price and Rating – JM Financial has maintained its ADD (Light Buy/Wait Buy) rating on Vodafone Idea and raised its target price from ₹11 to ₹12 (considering potential relief in AGR liabilities). Clear Recommendations for Investors: Who can buy? Those willing to take higher risks Those who want to play a revival bet in the telecom sector Those who believe the government will protect VIL (3+1 player market policy) Who should stay away? Those who want stable growth stocks Those who cannot tolerate subscriber losses and debt risk When can the rally begin? As VIL raises significant funds, its 5G rollout accelerates, the ARPU gap with Airtel and Jio begins to narrow, and most importantly, subscriber losses stop.
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