Vodafone Idea EBITDA beat highlights ARPU gains amid funding and subscriber risks

Investment View and Valuation

In its August 11, 2026 results update, Motilal Oswal Financial Services (MOFSL) said Vodafone Idea’s 1QFY27 performance was ahead of expectations. However, it retained its Neutral rating because funding closure, consumer subscriber stability, tariff actions and valuation remain critical. The broker revised its target price to Rs 11, below the report CMP of Rs 13.

The target price is based on a DCF-backed 14.3 times September 2028E reported EBITDA, equivalent to about 25 times September 2028E pre-Ind AS 116 EBITDA. MOFSL believes Vodafone Idea’s approximately 26.6 times September 2028 pre-Ind AS EV/EBITDA valuation carries a significant premium to Bharti India’s approximately 10.5 times, limiting upside.

1QFY27 Financial Performance

The EBITDA outperformance was driven chiefly by network operating costs, which were flat quarter-on-quarter and year-on-year and 5.7% below MOFSL’s estimate, despite network expansion and higher diesel prices. The adjusted loss narrowed from Rs 55.2 billion in 4QFY26 and was lower than the broker’s estimate, helped by stronger EBITDA and lower-than-expected interest costs.

Wireless Operations and Subscriber Trends

Wireless revenue increased 1.8% quarter-on-quarter to Rs 102.5 billion. Reported wireless ARPU rose 1.7% quarter-on-quarter and 7% year-on-year to Rs 177. Customer ARPU excluding M2M increased 2.6% quarter-on-quarter and about 10% year-on-year to Rs 195, supported by premiumisation and a favourable subscriber mix.

Reported subscribers, including M2M, grew by 0.3 million to 193.1 million, marking the first positive net addition since the merger. However, consumer wireless subscribers excluding M2M declined by a larger 1.7 million quarter-on-quarter to 171.5 million, compared with a 1.1 million decline in 4QFY26.

Monthly churn moderated to 3.8% from 3.9%, but remained above Bharti and RJio. M2M additions drove much of the reported subscriber growth, while 4G/5G and data subscriber additions were lower than M2M additions, indicating continued consumer data SIM losses.

Enterprise Business and Network Expansion

Non-wireless or enterprise revenue grew about 15% quarter-on-quarter to Rs 14.2 billion, supported by wholesale volumes. Management described this business as lower margin but cash accretive.

Data volume grew about 8% quarter-on-quarter, while data usage reached 21.2 GB per data subscriber per month. Vodafone Idea added about 2,300 towers and 14,500 broadband sites during the quarter. 4G population coverage reached 87% in June 2026, and 5G services expanded to more than 200 cities across all 17 priority circles.

Funding, Capex and Management Guidance

Management said it had raised Rs 64 billion through partial warrant proceeds and funded and non-funded bank limits. This enabled Rs 90 billion of capex orders through 9MFY27.

The company remains engaged with an SBI-led bank consortium for a larger debt raise required to pursue its Rs 450 billion FY26-FY29 capex ambition. Management plans monthly site additions of 3,000-3,500, 55,000-57,000 additional 4G sites over 18 months, and about 86,000 5G sites over FY26-FY29.

Management reiterated its guidance for double-digit revenue growth and cash EBITDA of about Rs 270 billion by FY29. MOFSL considers this target ambitious: its own cumulative cash EBITDA forecast for FY26-FY29 is about Rs 333 billion, compared with management’s expectation of about Rs 600 billion.

MOFSL Estimates

MOFSL raised its FY27E-FY28E revenue estimates by about 1-3% on higher ARPU assumptions. It expects revenue to increase to Rs 475 billion in FY27E, Rs 513 billion in FY28E and Rs 546 billion in FY29E. Adjusted losses are expected to persist.

Key Risks to the Recovery

• Delayed or insufficient fundraising.
• The need for tariff hikes or a changed tariff structure.
• Continued consumer subscriber losses.
• Intensified competition.
• Higher rollout and diesel costs.
• The need for continued regulatory relief on spectrum and AGR dues.