Vodafone Idea CEO: We could need further government assistance

CEO Akshaya Moondra of Vodafone Idea told FE on Wednesday that when the present embargo on the adjusted gross revenue (AGR) and spectrum dues expires in September 2025, the company could need more government help. According to him, the business may ask the government to turn the outstanding debt into equity or pursue more payment delays.

“After a year and a half, we will be able to determine what kind of government assistance we need. We could first need some assistance, and the government will have the authority to decide whether to convert or postpone payment. Every time, that is their decision,” said Moondra.

Of the approximately Rs 2 trillion in total dues, 98%, or Rs 1.96 trillion, are owing to the government in the form of AGR and spectrum dues. There is only Rs 4,400 crore in bank debt. The corporation would have to pay the government Rs 29,100 crore for FY26 and Rs 43,000 crore every year for FY27 through FY31 when the embargo expires in September 2025.

There are two streams of payments, according to Moondra. The first is the initial instalment, which is estimated to be about Rs 17,000 crore in FY26 and Rs 26,000 crore in FY27.

 

“The postponed installments provide the remaining sum. The government included a provision for this to be converted to equity in its reform package, according to Moondra. She also said that the postponed spectrum conversion opportunity may not be necessary every year.

Even if the whole Rs 45,000 crore fundraising goal is fulfilled via a mix of Rs 20,000 crore through equity-linked instruments and Rs 25,000 crore through debt, the corporation could still need further government backing to satisfy its needs.

According to Moondra, Vodafone Idea has also filed a curative appeal in the Supreme Court about the AGR and spectrum dues. The result of this case will determine the future path.

Subscriptions for Vodafone Idea’s Rs 18,000-crore follow-on public offer (FPO) will be accepted beginning on Thursday. 74 anchor investors have already contributed Rs 5,400 crore to the firm.

The uncertainty over the company’s ability to continue was dispelled when the government unveiled the reform plan in 2021. The rumors about the company’s ability to make investments will be dispelled by this round of financing, according to Moondra. We will also have loan finance, which will come from the promoters, in addition to this cash. Thus, the total investment amount exceeds the FPO, he said.

Vodafone Idea intends to use its earnings from the FPO into three key areas of investment: expanding 4G population coverage, where it currently has a considerable competitive advantage; augmenting 4G capacity in response to increased traffic; and expanding 5G coverage.

Vodafone Idea has been losing customers in the lack of network improvements; its subscriber market share has even dropped below 19%, while rivals Bharti Airtel and Jio have greater market shares—more than 70%—than Vodafone Idea.

“Once we make the capital expenditure, the difficulties will be resolved. As the sector has grown over the last several years, we ought to be able to start taking part in it, Moondra said.

He claims that Ebitda receives a significant share of revenue increases brought about by improved asset leveraging. “Therefore, the availability of funding and our major investment in 4G coverage are the prerequisites for the improvement in our cash generation,” he said.

The business has pledged to investing Rs 5,700 crore of the anticipated funding towards the rollout of 5G services.

Even if Vodafone Idea’s 5G deployment may be delayed, considering the difficulties its counterparts are having with monetising and recovering their investments, it hasn’t exactly missed the 5G train. The good thing is that, despite being late adopters of 5G, this has really worked to our favor as it has prevented us from being in a scenario where deployment proceeded too rapidly without enough revenue generation, according to Moondra.

According to figures from the Telecom Regulatory Authority of India (Trai), Vodafone Idea lost 16.2 million mobile users between April and February, bringing its overall base down to 220.5 million. However, the company’s lack of 4G coverage and efforts in expanding capacity are more to blame for the customer turnover than the unavailability of 5G.

The business plans to use 5G to initially cover 40% of its current revenue base during the next two to three years. The services are anticipated to be launched in six to nine months after the capital campaign. But the business would be cautious with its 5G expenditures.

“If you have 5G spectrum, the additional expense of installing it someplace to address capacity issues is a desirable investment for 5G; nevertheless, we will need to see whether or not users are willing to pay more for 5G usage. And that’s where our 5G investments will be adjusted,” Moondra said.

Regarding the 5G corporate market potential, Moondra said that although characteristics like reduced latency and spectrum slicing are advantageous, certain applications have not yet gained traction.