MOSOL: TELECOM | Vodafone-Another dismal quarter-Early green-shoots visible, though-subscriber growth, ARPU improving

​TELECOM | Vodafone: Another dismal quarter; Early green-shoots visible, though; subscriber growth, ARPU improving

• Revenue, subscriber base decline: Vodafone India reported weak 2QFY18 results, with wireless revenue down 7% QoQ (-20% YoY) to INR85.7b. Peers Bharti/Idea's performance was relatively better, with a revenue decline of 5%/9% QoQ. Vodafone's ARPU fell 7% QoQ (-23% YoY) to INR132. Overall subscriber base too declined by 2% QoQ to 207m. Notably. this is the first quarter of a decline in the subscriber base for Vodafone/Idea since RJio's service launch. In our view, this is unusual, as operators typically prioritize subscribers over profitability to protect their revenue market share.
  
• Voice, data ARPU fall: Voice and data revenue fell 7% QoQ each. Voice ARPU declined by 7% QoQ to INR105 and data ARPU by 8% QoQ to INR96. Data volume increased steeply by 61% QoQ to 384m MBs (50% below Bharti's data traffic), led by its unlimited price plans (which increased its data usage/subs to 1.9GB). This, however, pulled down data rates by INR5 paise/MB, as ARPUs remained in a downward spiral.
  
• EBITDA disappoints; going slow with capex: Vodafone's EBITDA dropped 20% HoH to INR40b in 1HFY18, with the margin down 350bp HoH to 21.1%. This was led by a 6% fall in revenue, partly cushioned by a 2% drop in costs. Capex fell sharply to INR29b in 1HFY18 v/s INR50b in 2HFY17, as the spending intensity has slowed prior to the completion of merger with Idea. Operating FCF barely remained positive at INR16m in 1HFY18, cushioned by lower capex. Net debt stood at EUR8b (INR604b).