Vodafone Idea (Vi) is projecting a decline in its monthly subscriber churn rate, currently at 4%, starting from the fiscal fourth quarter. This expected improvement comes as the company plans to address its 4G coverage gaps through ongoing network capital expenditure (capex) initiatives. The recent capital raise of Rs 24,000 crore will enable Vi to increase its data capacity by 15% and enhance its 4G population coverage by 16 million by the end of September.
The telecom joint venture between Vodafone of the UK and India’s Aditya Birla Group is also counting on its recent sub-GHz spectrum acquisitions from the June 2024 auction. These acquisitions will expand its 900MHz band presence in 16 out of 17 priority circles, aiming to improve the 4G customer experience.
Analysts are optimistic about Vi’s future, predicting that the company will start seeing subscriber growth as it continues to close 4G coverage gaps and increase data capacity. They anticipate that the monthly churn rate will decrease once the capital expenditure deployment begins, offering relief after previous delays in capex and persistent subscriber churn issues had hurt operational performance.
In the June quarter, Vi lost 2.5 million customers, reducing its user base to 210.1 million. The company’s senior management expects that addressing the 4G coverage issues will help reduce the churn rate, which has been higher compared to competitors. Over the past four quarters, Vi’s churn levels ranged between 3.9% and 4.3%, while Jio and Airtel reported significantly lower churn rates of 1.7% and 2.8%, respectively.
To tackle these challenges, Vi’s capex program will be front-loaded in the first 18 months, prioritizing 4G coverage expansion and capacity decongestion. If Vi manages to significantly reduce subscriber losses and return to a growth trajectory, it could positively impact the stock outlook and lead to earnings upgrades.
