The Prime Minister’s Office (PMO) is reviewing a proposal from the Department of Telecommunications (DoT) to provide relief to Vodafone Idea (Vi), as per a report by Mint.
According to Mint, Vodafone Idea has repeatedly warned that upcoming payments on pending dues threaten its survival.
In an informal note to the PMO last month, the DoT suggested “multiple relief options,” including a possible two-year pause on statutory dues under the ongoing moratorium. A final decision on extending any relief will rest with the PMO, officials added to Mint.
Massive AGR dues weigh on Vodafone Idea
Vodafone Idea owes around Rs 83,400 crore in adjusted gross revenue (AGR) dues, with annual payments of Rs 18,000 crore starting next March. The total liability, including penalty and interest, stands close to Rs 2 trillion.
According to Mint, Vodafone Idea has said that banks are unwilling to lend further due to these hefty obligations, warning that it may not survive beyond a year without fresh funding. As of June, Vodafone Idea owed Rs 1,944.5 crore to banks and employs over 18,000 people, making its survival crucial to maintaining competition in India’s telecom sector.
Government explores repayment flexibility
Mint reports that the DoT has proposed options such as smaller annual payouts, extended repayment timelines, and waivers on penalties and interest on AGR payments.
Vodafone Idea, cash-strapped and trailing peers Bharti Airtel and Reliance Jio Infocomm in 4G and 5G rollouts, has urged the government to consider Rs 17,213 crore as the final principal and grant 100 per cent waiver on interest and penalties.
Mints highlights that former Vodafone Idea CEO Akshaya Moondra highlighted the banks’ concerns in a letter, saying a moratorium on AGR and spectrum instalments until at least FY30 could reassure lenders that government dues would be paid only after significant loan repayments.
Funding crunch stalls expansion plans
Vodafone Idea has struggled to raise Rs 25,000 crore in new bank funding to expand its 4G network and roll out 5G. Without fresh funds, the company’s planned capital expenditure of Rs 50,000-55,000 crore over the next three years may stall.
The Supreme Court’s rejection of Vodafone Idea’s plea to waive Rs 45,000 crore in interest and penalties has added to its financial strain. The four-year moratorium on payouts ends in September.
Communications Minister Jyotiraditya Scindia previously noted that further conversion of dues into equity could push Vodafone Idea above 50 per cent government ownership, effectively making it a public sector entity.
Debt funding key to survival
The AGR issue remains Vodafone Idea’s biggest challenge. In 2019, the Supreme Court ruled that operators must pay statutory liabilities on AGR, including non-telecom revenue. Vodafone Idea disputes the DoT’s calculation of Rs 58,000 crore, claiming its own assessment of Rs 21,500 crore is correct.
With the Supreme Court rejecting curative petitions in September 2024, Vodafone Idea awaits government relief to secure funding and continue operations.