InvestorQ : What are the major challenges for Vodafone Idea after the Supreme Court judgment on AGR issue?
Anamika Sodhani made post

What are the major challenges for Vodafone Idea after the Supreme Court judgment on AGR issue?

Angel dcosta answered.
2 years ago

The first big challenge for Vodafone is raising the funds at an economical cost. The next big challenge for Vodafone Idea will be to arrange funds. Global giants like Amazon and Verizon have already shown interest in getting into a long term arrangement with Vodafone India.

There are good reasons too. Vodafone Idea has a customer base of 28 crore and that makes a very good retail and consumer property. It is a readymade digital customer base and they become automatic clients for most digital product or solution.

Funding should not be the major challenge as even the promoters would be willing to come forward, now that the uncertainty over the AGR issue is done and dusted. However, an external stake sale and a big name will add a lot of value for market investors.

While funding will be the simpler issue, the bigger challenge will be financial viability to service that kind of funding and an average AGR liability of Rs.5000 crore annually. Don’t forget that Vodafone has almost blown up its capital with huge losses.

Coming back, the real issue remain the average revenue per user or ARPU. Higher ARPUs will be needed to offset the payout over next 10 years. It is estimated that Vodafone Idea will need ARPU of Rs.200-220 to be financially viable over the next few years.

The problem is that last quarter the ARPU had actually dipped to Rs.110 and Jio is breathing down its neck and also snatch market share. Loss leader strategy cannot work any longer. How Vodafone manages to double its ARPU from these levels remains the big question.

In short, the real struggle for Vodafone Idea may have just begun. The judgment has given it some room to spread its wings and operate. But the P&L battle has just begun for Vodafone. How it manages ARPUs will hold the key.