- Vodafone Idea posted a loss of Rs. 4,878 crore or over $700 million in the first quarter of the ongoing financial year on 26th July.
- Two top telecom operators Vodafone and Idea Cellular were merged last year
The stock of Vodafone Idea crushed by a huge 27 percent in today’s trade closing at Rs. 6.7 per share. This indicates that Vodafone has lost as much as Rs. 1,400 crore (approx. $200 million) in one single day’s trade.
Vodafone Idea posted a loss of Rs. 4,878 crore or over $700 million in the first quarter of the ongoing financial year on 26th July.
A report by CLSA said, “Vodafone Idea’s results disappointed with revenues, EBIDTA (pre-tax profits), and a loss- all missed estimates.”
Last year, two top telecom operators Vodafone and Idea Cellular were merged last year, and these synergies will start paying off in one year time.
CEO of Vodafone Idea, Balesh Sharma said, “We are delivering on our stated strategy, although the benefits are not yet visible in our top row. We are well on track to deliver our synergy targets by Q1 of 2020-21. We expect these factors to contribute to our financial growth going ahead.”
Shareholders are certainly not in a mood to wait for so long. Despite the huge size of the company, they are not able to cope up the competition from Reliance Jio which has been gaining users on the cost of Vodafone Idea.
The entity has been losing everything from quantity to quality of subscribers. Its average revenue per users (ARPU) increased by a meager 4 percent to Rs. 108. Adding on to misery, the best paying customers of the company have downgraded to the cheaper plans meaning lesser profits for the company.
Analysts believe that Vodafone’s future will depend on pricing plans by its competitors. For example, If Reliance Jio increases its price, it will create room for others and improve margins but if it persists with the ongoing strategies, it will be harmful to Vodafone.
Recently, Reliance Jio has become the country’s largest telecom operator with a subscriber base of more than 331.3 million, surpassing Vodafone-Idea Merger which on July 26 reported a decline in its user base to 320 million by June 2019. Earlier this month Jio had grabbed the 2nd position beating the Airtel in terms of subscriber count.
With a huge surge in smartphone and internet users, the market is growing with a rapid pace for telecom operators. Vodafone Idea needs a major overhaul and better strategies in order to compete and keep pace with Reliance Jio.