Why Vodafone Idea Share Price is Rising

The Indian stock market has experienced a sharp decline in October 2023.

From its peak on 3 October 2023, the Sensex fell by over 3,300 points, or 5%, in six days. The Nifty fell by over 1,500 points, or 7%, over the same period.

The Indian economy continues to remain one of the fastest-growing world economies, yet markets are in free fall due to global uncertainties.

The ongoing Israel-Hamas war and the rise in US bond yields have led global markets to correct, and Indian equities are not an exception.

Remarkably, amid this challenging market environment, shares of Vodafone Idea, a telecom service provider, have exhibited remarkable resilience. They notched an 8% gain on Monday this week, and even continued the upbeat sentiment in the next trading session.

On Friday last week too, the stock ended higher by 1.4%.

Let's find out why shares of the telecom major are on a roll...

#1 5G Launch

Vodafone Idea shares were upbeat in recent sessions due to the company's long-anticipated announcement at the India Mobile Congress (IMC), regarding its comprehensive plan to venture into the realm of 5G technology.

This move is seen as a significant step towards bolstering their competitive position in the high-speed telecom market, which had been a matter of concern for the beleaguered company.

While larger competitors, such as Reliance Jio and Bharti Airtel, had already taken substantial strides in expanding their 5G networks, Vodafone Idea's commitment to investing in both 4G expansion and 5G development initiation aligns with government directives.

This strategic shift represents a proactive approach by Vodafone Idea to mitigate the loss of subscribers, which has been a recurring issue for the company in recent months.

Only now has the company recognised the urgency of adapting to the evolving telecom landscape, particularly, the transition to 5G, as a means to retain and attract customers.

#2 Funding Boost

The other reason why shares got a boost is because reportedly, the company is in final stages to secure funding from investors.

Vodafone Idea is in final stages of negotiations to secure funding from investors within the current quarter. The company's promoters have reaffirmed their commitment to infuse an additional Rs 200 billion (bn) into the company, and this injection is expected to align with investments from external investors.

During the previous quarter, the telecom company successfully resolved its spectrum dues by utilising bank debt, and this debt is scheduled for repayment by the end of March 2024.

Vodafone Idea has been actively pursuing a fundraising target of Rs 200 bn from external investors through a combination of debt and equity funding.

The carrier is currently engaged in discussions with various network vendors to solidify its strategy for network expansion. It has underscored that substantial capital expenditures for network growth will be undertaken once the necessary funding is secured.

Furthermore, the company is proactively urging its potential equity partners, with whom discussions are ongoing, to allocate a portion of the funds for settling outstanding vendor dues. This move is part of an initiative to expedite payments to these vendors.

The company's capacity to secure funding from both its promoters and external investors stands as a pivotal factor contributing to the upswing in its share price.

What Next?

In the September 2023 quarter, Vodafone Idea reported revenue from operations of Rs 107.2 bn, marking a 0.9% increase from the previous year's figure of Rs 106.1 bn. This marginal revenue growth was primarily attributed to an improved subscriber mix and an increase in 4G subscribers.

However, the company's net loss for the quarter widened to Rs 87.4 bn compared to Rs 75.9 bn in the corresponding quarter of the previous year.

Despite these financial challenges, there was a positive development in the blended average revenue per user (ARPU) per month, which increased from Rs 139 to Rs 142 compared to the previous quarter.

Year-on-year, ARPU rose from Rs 131. It's important to note that the ARPU, while showing improvement, still lags behind its industry peers.

To overcome this, Vodafone Idea is committed to realising the government's vision of establishing a robust supply chain in critical and emerging areas, including Open RAN (Radio Access Network).

The telecom sector is currently facing a demand-supply gap of 2.41 million, and this is expected to increase significantly to 3.8 times by 2030, providing a substantial boost to the telecom industry.

The telecom sector holds a significant position in India, being the third-largest industry and contributing approximately 6.5% of all FDI inflow.

Additionally, by 2027, India is projected to account for 11% of all 5G subscriptions globally. As technology advances into the era of Web 3.0, the proportion of software in the telecom sector is expected to triple.

Emerging trends suggest that with the integration of AI and the advent of more powerful 6G network technologies by 2023, along with harnessing the value of IoT, RPA, AI/ML, and the Metaverse, the telecom and tech industries are poised to reach new heights.

These developments are set to bolster Vodafone Idea's position in India as it navigates the evolving telecom landscape.

How Vodafone Idea Shares have Performed Recently

Vodafone Idea shares have jumped more than 10% in a week. So far in 2023, shares of the company have soared 48%.

Over the year shares of the company are trading higher by 38.6%.

Vodafone Idea touched its 52-week high of Rs 12.5 on 18 September 2023 while it touched a 52-week low of Rs 5.7 on 31 March 2023.

About Vodafone Idea

Vodafone Idea is an Aditya Birla Group and Vodafone group partnership. It's among India's leading telecom service providers.

The company provides pan India voice and data services across 2G, 3G, and 4G platforms.

On 31 August 2018, Vodafone India merged with Idea Cellular, to form a new entity named Vodafone Idea.

Vodafone currently holds a 45.1% stake in the combined entity and Aditya Birla Group holds a 26% stake.

On 7 September 2020, Vodafone Idea unveiled its new brand identity, 'Vi' which involves the integration of the company's erstwhile separate brands 'Vodafone' and 'Idea' into one unified brand.

The company is developing infrastructure to introduce newer and smarter technologies, making both retail and enterprise customers future ready with innovative offerings.

For more details about the company, you can have a look at Vodafone Idea's factsheet and Vodafone Idea's quarterly results on our website.

You can also compare Vodafone Idea with its peers.

Vodafone Idea vs Bharti Airtel

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Vodafone Idea vs MTNL

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