Beleaguered telecom player Vodafone Idea may get relief from the government for its adjusted gross revenue (AGR) dues in the form of a further two-year deferral since the government has ruled out any further equity conversion, according to analysts.
The telco, which has been trying to raise Rs 25, 000 crore from banks to fund its Rs 50, 000-55, 000 crore three-year capex plan, has said that capex deployment beyond H1FY26 will be dependent on fundraising plans.
“We now incorporate government AGR relief via 2-year deferral of dues and consistent external fundraising via debt as well as equity route,” analysts from Ambit Capital said.
Late last week, Union minister Jyotiraditya Scindia said in an interview that there is no further scope of equity conversion in the distressed telco, after the government raised its stake in Vodafone Idea to 49% following the conversion of the telco’s spectrum debt, amounting to Rs 36, 500, into equity.
In a double setback for the telco last month, the Supreme Court turned down its appeal seeking relief from payments related to AGR dues, penalties and interest on penalties to the tune of Rs 45, 000 crore.
The telco’s management, on its fiscal fourth quarter earnings call said that while relief from payment of AGR dues is not a condition to raise funds from banks, lenders are seeking clarity on the matter. Additionally, Vodafone Idea chief executive Akshaya Moondra said that the telco will restart its conversations with banks regarding fund-raise this month. He also said that the company was engaging with the government to find a solution to the AGR matter.
The fundraise will be crucial for Vodafone Idea to continue its capex intensity beyond September 2025. The management gave a guidance of Rs 6, 000 crore of capex under execution for the first two quarters, but said that further investments will depend on funding.
Vi’s capex intensity has increased over the past two quarters (Rs 7, 600 crore in H2 FY25 vs Rs 1,900 crore in H1FY25) as it installed new towers to bolster its 4G network, and expand its 5G network. Moondra said that the capex under execution will allow Vodafone Idea to cover around 85% of the population with 4G, but to achieve the goal of 90% coverage, it will need to increase capex.
Meanwhile, the impact of increasing average revenue per user (Arpu) to revenues for the telco was hit by continued customer loss, even as SIM consolidation on account of the July 2024 tariff hikes seems to be behind the telco, analysts said.
“Revenue growth was lower due to subs dipping 1.6mn (slipped 0.8% q-o-q) to 198 million. Continued subs decline was due to higher churn rate, and pending benefit of network rollout,” analysts from ICICI Securities observed.
Vodafone Idea’s revenue fell 0.9% on quarter at Rs 11, 117.3 crore in the March quarter. While Arpu (ex-enterprise connections) rose to Rs 175 despite 2 fewer days in the quarter, its subscriber base shrunk further due to churn levels of 4.1%.
The silver lining however is that the latest churn levels are similar to those before the July 2024 hike, indicating sim consolidation on account of raised tariffs has ceased.
“VIL’s subscriber losses have moderated to pre-tariff hike levels, but continue to hinder its recovery trajectory,” analysts from Nuvama said.
The telco also continued to lose data customers – 0.1 million sequentially – though it added 4G/5G customers (0.4 million), indicating it is reaping the benefits of its network upgradation efforts.
Vodafone Idea expanded network by 6,900 unique 4G towers, (largest quarterly addition since merger) and added 18,400 sites for enhancing coverage and added 14,500 sites in 1800/2100 MHz primarily to boost network capacity.
Analysts did observe that the telco’s gross adds at 22 million are slightly behind peers Bharti Airtel and Reliance, but healthy. However, the telco continues to lose customers on account of weaker 5G offering, and lower 4G coverage still.
Analysts also reiterated that fund raise through bank borrowing or further equity dilution, and relief on adjusted gross revenue (AGR) dues from the government will be key factors for the telco’s future prospects.