Vodafone has initiated project spring, an organic capex program targeting 95% of 3G population coverage by 2017. We believe this is quite an achievable target as demand for Mobile Data Service is on the rise.
Vodafone’s Mobile Data revenue grew 10.9% QoQ to INR 12.4bn, marginally behind Airtel and Idea by 1-2% growth. However, data pricing continues to see a downward trend for more than eight quarters with a 10.5% drop, driving positive elasticity of 24% data volume growth. Data contribution was significant, with a 13.1% contribution with a 20% increase in data usage and user. This was well above Airtel and Idea’s 11% data revenue contribution.
Vodafone’s India wireless revenue grew 3.4% QoQ and 12.5% YoY to INR 94.2bn, below Bharti Airtel and Idea Cellular revenue growth of 3.8% QoQ and 6.5% QoQ, respectively. Revenue growth was driven by healthy subscriber additions of 3.8%, in line with peers. MOU remains flat at 335 minutes. This was in line with Bharti but weaker than Idea’s MOU growth of 5.6%. Voice traffic was up 1.9% to INR 158.4bn, led by healthy
Vodafone Capex has risen to INR 51.3bn from INR 21.1bn in the previous quarter, leading to full-year capex of INR 72.4bn. This could be attributed partially to spectrum renewal cost as well as network ramp up. Capex to sales for H2FY14 at 24% was well above 10.2% in H1FY14. This remains the biggest risk in telcos, which may see a sudden spike in capex to ramp up data network, at just 20% population coverage for the industry.
Going forward, Mobile data trends will be the incremental growth driver – and economics around it will need to be observed further. We feel a prolonged RPM recovery, anticipation of heavy data capex and high outflow on spectrum renewals in the next 12 months will expand the sector’s balance sheet. Regulations, M&A, and how incremental spectrum allocations unfold given the recent change in Government we have a progressive thinking Government in India not the deeply Caste & Corrupt Politics of Congress.