Vodafone Idea Ltd
NSE:IDEA
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Intrinsic Value
The intrinsic value of one IDEA stock under the Base Case scenario is 20.42 INR. Compared to the current market price of 7.34 INR, Vodafone Idea Ltd is Undervalued by 64%.
The Intrinsic Value is calculated as the average of DCF and Relative values:
Valuation Backtest
Vodafone Idea Ltd
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Fundamental Analysis
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Vodafone Idea Ltd., a prominent player in India’s telecommunications landscape, emerged from the merger of Vodafone India and Idea Cellular in 2018. This strategic consolidation aimed to harness synergies and create a formidable entity capable of competing with industry giants in a fiercely competitive market. With a subscriber base exceeding 300 million, Vodafone Idea has positioned itself as a significant player in the sector, offering a range of mobile services, including voice, data, and digital solutions. Yet, the company’s journey has been marked by challenges, particularly regarding debt levels and intense competition that have pressured profitability and market share. As an investo...
Vodafone Idea Ltd., a prominent player in India’s telecommunications landscape, emerged from the merger of Vodafone India and Idea Cellular in 2018. This strategic consolidation aimed to harness synergies and create a formidable entity capable of competing with industry giants in a fiercely competitive market. With a subscriber base exceeding 300 million, Vodafone Idea has positioned itself as a significant player in the sector, offering a range of mobile services, including voice, data, and digital solutions. Yet, the company’s journey has been marked by challenges, particularly regarding debt levels and intense competition that have pressured profitability and market share.
As an investor, appreciating Vodafone Idea's potential involves recognizing both its challenges and opportunities. The Indian telecom market's growth trajectory, fueled by increasing smartphone penetration and the rising demand for data services, presents a fertile ground for expansion. While the company has faced hurdles such as regulatory pressures and financial instability, efforts to optimize operations and improve customer experience highlight a path toward recovery. The government's recent supportive measures for the telecom sector could also bode well for the company’s financial health. For astute investors, Vodafone Idea offers a compelling narrative of resilience and transformation, with the potential for substantial returns as it navigates through its current complexities and leverages India’s digital revolution.
Vodafone Idea Limited, commonly known as Vi, is one of the largest telecommunications companies in India. The core business segments of Vodafone Idea can be summarized as follows:
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Mobile Services: This is the primary segment of Vodafone Idea, providing voice and data services to individual and business customers. It includes pre-paid and post-paid mobile plans and covers a wide range of services from basic voice call plans to high-speed mobile internet access (4G and beyond).
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Enterprise Solutions: Vodafone Idea offers various services targeted at businesses, including mobile connectivity, internet of things (IoT) solutions, cloud services, and other enterprise-grade communication services. This segment caters to the needs of small, medium, and large enterprises for their connectivity and communication needs.
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Value-Added Services (VAS): In addition to core mobile services, Vodafone Idea provides value-added services such as content streaming, mobile payments, SMS services, and customer care solutions. These services enhance customer experience and drive additional revenue streams.
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International Services: Vodafone Idea, as part of the larger Vodafone Group, often collaborates for international roaming and communication services. While this segment may not be the core of their revenue, they provide functionalities for users traveling abroad.
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Digital Services and Content: This includes partnerships for OTT (over-the-top) content streaming, mobile entertainment, and educational services. This segment is becoming increasingly important as consumers lean towards digital consumption.
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Infrastructure Services: Vodafone Idea also plays a role in the telecom infrastructure sector by utilizing its towers and network equipment for both its operations and potential leasing to other service providers.
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Sustainability and CSR Initiatives: Although not a traditional business segment, Vodafone Idea engages in various corporate social responsibility initiatives, contributing to education, health, and environmental sustainability, which may enhance its brand value among consumers.
These segments collectively enable Vodafone Idea to compete in the highly competitive telecom market in India and provide a broad range of services to meet diverse customer needs.
Vodafone Idea Ltd, now operating under the brand name Vi, possesses several unique competitive advantages that may differentiate it from its rivals in the Indian telecommunications market. Here are some key advantages:
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Extensive Network Infrastructure: The merger of Vodafone India and Idea Cellular has allowed Vi to create one of the most extensive network infrastructures in India. This broad reach can provide better coverage and service availability in both urban and rural areas.
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Large Customer Base: Following the merger, Vi gained a significant customer base, which not only increases its market presence but also enhances its ability to cross-sell services and products.
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Diverse Service Offerings: Vi offers a wide variety of services, including mobile telecommunications, broadband, and value-added services. This diversification can help retain customers who might be looking for one-stop solutions.
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Brand Recognition: The brand equity from two well-established names (Vodafone and Idea) can be advantageous in attracting and retaining customers, especially in a competitive market.
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Strategic Partnerships: Vi has entered into partnerships with various tech firms and content providers, which can enhance service offerings and improve customer experience through exclusive content or applications.
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Market Positioning: With a focus on affordability, Vi often offers competitive pricing and plans that cater to diverse consumer segments, including price-sensitive customers.
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Synergies from the Merger: The merger has resulted in cost synergies in terms of operations, network sharing, and reduced overhead. This can enhance profitability compared to standalone competitors.
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Innovative Digital Services: Vi has been focusing on enhancing digital capabilities, offering services in mobile financial solutions, digital entertainment, and customer engagement, making it a more integrated player in the digital landscape.
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Customer Engagement and Retention Initiatives: Vi engages in various loyalty programs and promotional campaigns to retain customers and reduce churn, which can be crucial in highly competitive markets.
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Regulatory Compliance and Adaptation: As one of the larger players in the industry, Vi's ability to adapt to regulatory changes and compliance requirements efficiently can serve as a strength compared to smaller competitors struggling with such transitions.
While these competitive advantages can position Vodafone Idea Ltd favorably within the industry, it is also essential to note that the telecom sector is highly competitive, and effective execution of strategies will be crucial to sustain these advantages.
Vodafone Idea Ltd (Vi) faces several risks and challenges that may impact its business in the near future:
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Debt Burden: Vodafone Idea carries a substantial amount of debt, which poses a risk in terms of financial stability. High levels of debt can affect the company’s ability to invest in network upgrades and other essential areas.
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Competition: The telecom sector in India is highly competitive, with strong players like Reliance Jio, Bharti Airtel, and others. Intense competition can lead to pricing wars, thereby impacting revenue and profit margins.
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Regulatory Risks: The telecom industry is subject to extensive regulation from the government. Changes in regulatory policies, such as spectrum pricing or service quality norms, could impose additional costs or operational restrictions.
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Technological Advancements: The rapid pace of technological change in telecommunications requires continuous investment in infrastructure and technology. Failure to keep up with technological advances, such as 5G deployment, could result in losing market share.
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Subscriber Attrition: Vi has faced challenges in retaining subscribers amidst competition offering better services and offers. High churn rates can lead to a significant loss of revenue.
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Financial Viability of Business Model: As the company tries to balance service quality with affordability, any misalignment could jeopardize its financial viability. Achieving profitability in a competitive landscape remains a significant challenge.
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Market Penetration in Rural Areas: While urban penetration may be saturated, rural and semi-urban areas offer growth opportunities but come with challenges such as infrastructure development and customer acquisition costs.
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Economic Factors: Economic downturns or changes in consumer spending behavior can affect earnings. The telecom sector is sensitive to overall economic conditions, which can influence both individual and business spending on telecommunications services.
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Investor Sentiment: Given the company's financial struggles and market position, negative investor sentiment can impact stock performance, capital raising, and partnerships.
These risks will require vigilant management and strategic planning to navigate successfully. The telecom sector's dynamic nature demands adaptability, strong financial discipline, and continuous innovation.
Revenue & Expenses Breakdown
Vodafone Idea Ltd
Balance Sheet Decomposition
Vodafone Idea Ltd
Current Assets | 128.6B |
Cash & Short-Term Investments | 5.9B |
Receivables | 22B |
Other Current Assets | 100.7B |
Non-Current Assets | 1.7T |
Long-Term Investments | 71B |
PP&E | 528.1B |
Intangibles | 1.1T |
Other Non-Current Assets | 67.2B |
Current Liabilities | 541.4B |
Accounts Payable | 137.3B |
Other Current Liabilities | 404.1B |
Non-Current Liabilities | 2.4T |
Long-Term Debt | 2.3T |
Other Non-Current Liabilities | 78B |
Earnings Waterfall
Vodafone Idea Ltd
Revenue
|
425B
INR
|
Cost of Revenue
|
-216.4B
INR
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Gross Profit
|
208.7B
INR
|
Operating Expenses
|
-260.8B
INR
|
Operating Income
|
-52.1B
INR
|
Other Expenses
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-246.2B
INR
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Net Income
|
-298.3B
INR
|
Free Cash Flow Analysis
Vodafone Idea Ltd
INR | |
Free Cash Flow | INR |
Vodafone Idea ended the quarter with a revenue of INR 105.1 billion and an EBITDA margin of 20%. They successfully raised over INR 240 billion in equity this year. Investments are being funneled into enhancing 4G and preparing for 5G, resulting in a projected 15% increase in data capacity and expanding coverage. Vodafone Idea aims to improve customer experience and achieve a smart turnaround. They have also taken steps to rationalize tariffs and introduced innovative plans to boost revenue and consumer engagement.
What is Earnings Call?
IDEA Profitability Score
Profitability Due Diligence
Vodafone Idea Ltd's profitability score is 55/100. The higher the profitability score, the more profitable the company is.
Score
Vodafone Idea Ltd's profitability score is 55/100. The higher the profitability score, the more profitable the company is.
IDEA Solvency Score
Solvency Due Diligence
Vodafone Idea Ltd's solvency score is 20/100. The higher the solvency score, the more solvent the company is.
Score
Vodafone Idea Ltd's solvency score is 20/100. The higher the solvency score, the more solvent the company is.
Wall St
Price Targets
IDEA Price Targets Summary
Vodafone Idea Ltd
According to Wall Street analysts, the average 1-year price target for IDEA is 11.82 INR with a low forecast of 2.53 INR and a high forecast of 24.15 INR.
Dividends
Current shareholder yield for IDEA is .
Shareholder yield represents the total return a company provides to its shareholders, calculated as the sum of dividend yield, buyback yield, and debt paydown yield. What is shareholder yield?
Profile
Country
Industry
Market Cap
Dividend Yield
Description
Vodafone Idea Ltd. engages in the provision of telecommunication services. The company is headquartered in Mumbai, Maharashtra. The company went IPO on 2007-03-09. The firm is engaged in the business of mobility and long-distance services. The company provides pan-India voice and data services across second-generation (2G), third-generation (3G) and fourth-generation (4G) platforms. Its Vodafone Idea business services provide communication solutions to global and Indian corporations, public sector and government bodies, small and medium enterprises and start-ups. The company offers voice services, broadband services, and content and digital offerings. Its other services include entertainment services, such as sports, interactive voice response (IVR)-based content, wireless application protocol (WAP)-based games; voice and short message service (SMS)-based services, such as caller tunes, voice and SMS chat, star talk, expert advice and subscriptions services; and utility services, such as missed call alerts, doctor on call and astrology services.
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The intrinsic value of one IDEA stock under the Base Case scenario is 20.42 INR.
Compared to the current market price of 7.34 INR, Vodafone Idea Ltd is Undervalued by 64%.