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In-line 1Q; debt raise crucial for long-term survival

* Vodafone Idea’s (Vi) reported EBITDA declined 1% QoQ (vs.3%/5% QoQ for Bharti India Wireless/RJio), ~1% above our estimates, as lower network opex (+1% QoQ) was offset by higher SG&A costs (+8% QoQ).

* Operationally, subscriber losses moderated further to a modest 0.5m (vs. - 1.6m in 4Q), while ARPU inched up 0.6% QoQ to INR165 (+13% YoY, in line).

* Vi continued to lose market share as wireless revenue remained flat QoQ (+6% YoY, in line), compared to ~3% QoQ growth for peers.

* After a record high capex in 4QFY25, Vi’s capex moderated to INR24b (vs. INR42b QoQ). Management indicated a capex of ~INR25-35b in 2QFY26, while future capex plans remain contingent on the successful closure of debt raise. Vi continues to engage with lenders; however, the fund raise has remained elusive thus far.

* Despite equity infusion and acceleration in network capex, Vi has continued to lose market share to peers. On our estimates, Vi lost further ~20bp QoQ (110bp YoY) in subscriber market share (SMS) and ~30bp QoQ (~140bp YoY) in revenue market share (RMS) among the three private telcos.

* Further, as we have argued earlier, tariff hikes do not benefit Vi as much as its peers. We note, Vi’s revenue grew a modest ~6% YoY, translating into an annualized increase of ~INR22b vs. ~INR195b/INR140b for Bharti/RJio).

* In the absence of relief on AGR dues (~INR164b annual repayments starting Mar’26) and the closure of debt raise, Vi’s planned capex of INR500-550b remains in jeopardy, potentially resulting in higher subscriber churns.

* We cut our FY27-28 revenue and EBITDA estimates by ~4-5%, each driven by higher subscriber declines. We reiterate our SELL rating on Vi with a revised TP of INR6, based on DCF implied ~12.5x Sep’27E EV/EBITDA.

Broadly in line 1Q; subscriber losses moderate further

* Vi’s overall subscriber base at 197.7m declined 0.5m QoQ (further moderation vs. 1.6m declines in 4QFY25 and our expectation of -1.2m.

* Wireless ARPU rose 0.6% QoQ (in line) at INR165 (+13% YoY, vs. +1%/+2% QoQ for RJio/Bharti), driven largely by one extra day QoQ.

* Monthly churn was stable QoQ at 4.1% (vs. a 40bp QoQ uptick for Bharti at 2.7%) and remains a key monitorable.

* Wireless revenue at INR98b (+6% YoY, in line) was flat QoQ (vs. ~3% QoQ increase for Bharti/RJio), as slightly higher ARPU was offset by modest subscriber declines.

* Reported EBITDA at INR46.1b (-1% QoQ, +10% YoY vs. ~3%/5% QoQ for Bharti-India Wireless and RJio) was ~1% above our estimate, as lower network opex (+1% QoQ, 4% below) was offset by higher SG&A (+8% QoQ, 8% above).

* EBITDA margin contracted ~50bp QoQ (35bp above) to 41.8% (up 185bp YoY, +20bp/+125bp QoQ for Bharti-India Wireless and RJio).

* Pre-Ind-AS 116 EBITDA at INR21.8b (in line) declined ~6% QoQ (+4% YoY), as margin contracted ~130bp QoQ to 19.8% (-20bp YoY, in line)

* Losses narrowed to INR66b (vs. INR72b QoQ and our estimate of INR75b), due to lower interest costs (-8% QoQ, interest savings from recent GoI equity conversions).

* Net debt (excl. leases but including interest accrued) increased INR69b QoQ to INR1.94t. Vi still owes ~INR1.99t to GoI for the deferred spectrum and AGR dues. External/banking debt declined to ~INR19.3b (vs. INR23b QoQ).

* Capex moderated to INR24.4b (vs. a record high of INR42b in 4QFY25).

Key highlights from the management commentary

* CEO change: Following the completion of a three-year tenure, Mr. Akshaya Moondra has stepped down as CEO of Vi. The current COO, Mr. Abhijit Kishore, will assume the role of CEO from 19th Aug’25.

* Capex: 4Q capex stood at INR24.4b, with 4,600+ new broadband towers, bringing 4G coverage to 84% of the population. Management reiterated its commitment to INR50-60b capex in 1HFY26, but noted that major capex beyond 1HFY26 remains contingent on the closure of the debt raise and will be funded by internal accruals in the interim.

* Debt raise: Vi continues to engage with lenders other than banks as well for closing the long-awaited debt raise. Discussions with banks have progressed following the GoI equity conversion and credit rating upgrades, but banks continue to seek additional assurance on the AGR dues. Management remains confident that the GoI is committed to maintaining a three-private-telcos construct and is hopeful of relief on AGR dues.

* 5G: Vi has rolled out 5G in 22 cities across 13 circles, marking steady progress since the Mar’25 launch in Mumbai. Adoption has been encouraging, with 60- 70% of customers owning 5G devices already using the services where available. The company’s focus remains on expanding 5G to key cities across 17 priority circles by Sep’25.

* Subscriber trends: Subscriber churn, particularly to BSNL, has stabilized since Jan’25, with the company confident that the worst is behind. Efforts to enhance network quality and customer engagement have begun yielding results. Seasonality and labor migration impacted VLR subs in 1Q, but management sees an improving subscriber trend as population coverage expands.

Valuation and view

* Despite equity infusion and acceleration in the network capex, Vi continues to lose market share to peers due to lower ARPU translation from tariff hikes, given its inferior subscriber mix and elevated subscriber churn.

* While Vi’s subscriber losses have moderated further in 1QFY26, we believe that without the closure of its debt raise, Vi’s plans for a significant capex cycle (INR500-550b over the next 2-3 years) remain in jeopardy, potentially resulting in elevated churn going ahead.

* Further, as we have argued earlier, tariff hikes do not benefit Vi as much as its peers. We note, Vi’s revenue grew at a modest ~6% YoY, or an annualized increase of ~INR22b, vs. ~INR195/140b for Bharti/RJio).

* In the absence of a relief on AGR dues (~INR164b annual repayments starting Mar’26) and closure of debt raise, Vi’s planned capex of INR500-550b remains in jeopardy, potentially resulting in higher subscriber churns.

* We cut our FY27-28E revenue and EBITDA estimates by ~4-5% each, driven by higher subscriber declines. We reiterate our SELL rating on Vi with a revised TP of INR6, based on DCF implied ~12.5x Sep’27E EV/EBITDA.

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