Vodafone Idea resumes relief talks with govt., links capex to bank funding

Mint

2 days ago

Vodafone Idea Ltd has begun discussions with the government to explore a resolution on the telecom operator's substantial dues, barely two weeks after the Supreme Court rejected its plea for a waiver on related payments.
The struggling company is also engaging with banks to secure debt funding for its long-term expansion, chief executive Akshaya Moondra said, adding that banks would want clarity on the dues the telco owes to the government before they agree to lend.
But it is not preventing the discussions from moving forward, Moondra said.
'I see no reason why the government should be constrained in any way to offer relief…,' Moondra said on Monday during a call with analysts to discuss Vodafone Idea's March-quarter earnings.
Vodafone Idea is set to incur capital expenditure of ₹ 5,000-6,000 crore for the first half of 2025-26 to enhance its network and infrastructure. However, its next leg of spending would be dependent on funds from banks, Moondra said.
The Supreme Court on 19 May dismissed writ petitions by Vodafone Idea, Bharti Airtel Ltd and Tata Teleservices Ltd seeking relief on interest, penalty, and interest on penalty on adjusted gross revenue (AGR) dues to the government.
Vodafone Idea owes ₹ 83,400 crore in AGR dues to the government and had sought a waiver on over ₹ 45,000 crore comprising interest, penalty, and interest on penalty.
While rejecting the petitions, the Supreme Court bench comprising Justices J.B. Pardiwala and R. Mahadevan clarified the court would not stand in the way if the government chose to step in. 'If the government wants to help you, we are not coming in your way,' Pardiwala had said.
However, the court's written order, issued on 21 May, makes no reference to that remark, which was widely seen as a green light for possible relief.
Vodafone Idea, India's third-largest telecom operator, is grappling with huge regulatory dues of around ₹ 2 trillion. The telecom operator said in its recent petition to the Supreme Court that it would not be able to operate beyond this fiscal year without bank funding, which remains elusive as lenders remain wary of its AGR dues worth more than ₹ 84,000 crore.
Starting 31 March 2026, Vodafone Idea must pay an annual instalment of over ₹ 18,000 crore for the next six years towards AGR and spectrum dues to the government. The dues are under moratorium, which will expire in September.
In 2025-26 itself, Vodafone Idea will have to pay ₹ 16,428 crore towards AGR dues and ₹ 2,539 crore towards deferred spectrum dues.
'The government may have to extend the moratorium or increase its stake in the telco,' said analysts at IIFL Capital in a 20 May note.
Vodafone Idea has been trying to raise bank funding of ₹ 25,000 crore for a long time now. The company said a recent credit rating upgrade as well as the government's recent conversion of dues worth ₹ 36,950 crore into equity has supported conversations with the lenders.
'There are some activities which we have to finish, which are currently in progress. We will again get to the point of discussions with the banks somewhere this month once some of the pre-requisites in terms of those actions and activities are completed,' Moondra said.
In May last year, Vodafone Idea said it would incur a capital expenditure of ₹ 50,000-55,000 crore over the next three years for expanding its 4G network and launching its 5G service.
'A large part of the capex will be implemented in the current quarter. In terms of our next round of capex, we have to decide and firm up our plan. It also has some dependence on funding. At least for this quarter and coming quarter, we are on track of incurring a capex of around ₹ 6,000 crore,' Moondra said.
'(With) the capex, which is already under execution, we should be reaching a level of 84% of (4G) population coverage. I believe we will move up from 84%, but to get to 90% (the capex) has got linkages with bank funding,' Moondra said, adding that Vodafone Idea had increased its 4G coverage to 83% as of March-end from 77% a year earlier.
Vodafone Idea incurred a capex of ₹ 4,230 crore in the January-March period, its highest in a quarter since the merger of Vodafone India and Idea Cellular in 2018. For FY25, the capex was at ₹ 9,570 crore, up from ₹ 1,850 crore in FY24.
In an exchange filing on 30 May, Vodafone Idea said its board had approved raising another ₹ 20,000 crore through a further public offering (FPO), private placement, or other permissible mode. A capital raising committee will evaluate and decide on the potential route of fundraising, the company said.
Moondra called for a tariff hike to help increase the return on capital employed for telecom operators. Despite a price increase in July 2022, the average revenue per user (Arpu) for telecom operators in India is still among the lowest in the world, he said.
'To ensure a fair return on significant investments and support future capital expenditure in the telecom industry, further tariff increases are essential. Additionally, the industry needs to move towards a pricing model where heavy data users contribute more proportionally to the high usage than the current pricing structure where the incremental data usage comes at an extremely low, unsustainable price,' Moondra said.
According to Moondra, there is no room to increase the tariffs much at the lower level and the industry collectively has to switch to a new tariff structure.
Last month, Bharti Airtel vice chairman and managing director Gopal Vittal also called for tariff restructuring to sustain the domestic telecom sector's financial health. Vittal too had explained that a tariff restructuring would mean reducing data allowances on some packs and charging more for those who can afford to pay.
Vodafone Idea's net loss in the fourth quarter of 2024-25 widened to ₹ 7,166 crore from ₹ 6,609 crore in the third quarter and ₹ 7,675 crore a year ago, due to an increase in expenses, especially finance costs, which include interest payments on debt and other liabilities.
Finance costs, accounting for 59% of the telecom operator's revenue from operations, rose 9% quarter-on-quarter and 3% year-on-year to ₹ 6,471 crore.
Revenue from operations rose 4% on-year to ₹ 11,014 crore. The revenue, however, was down nearly 1% sequentially owing to subscriber loss, largely in the lower-end segment.
The company's subscriber churn rate slowed during the March quarter. Compared to a loss of 5 million subscribers each in the September and December quarters, Vodafone Idea's subscriber churn slowed to 1.6 million in the fourth quarter. As of 31 March, it had 198.2 million mobile subscribers. Sequentially, its blended subscriber churn fell to 4.1% from 4.5%.
The number of 4G subscribers nudged up to 126.4 million in the fourth quarter from 126 million three months earlier.
Vodafone Idea shares climbed 1.73% to end Monday's trading session on BSE at ₹ 7.04 each.