Telecom major Vodafone Idea (Vi) delivered an in-line performance for Q4FY25, with slight improvements in key metrics such as ARPU and a moderation in subscriber losses. However, the company is still far from being out of the woods. The company’s long-term sustainability remains precarious. “While DoT and vendors’ debt obligations being converted to equity and promoters’ infusion of capital seem positive developments, a lot needs to fall into place for Vi to become an investible idea,” Nuvama said.
How was Q4 for Vi amid AGR woes?
To put things in perspective, the company on May 31, released its fiscal fourth quarter earnings with net loss widened to Rs 7,166.1 crore, marking a marginal improvement from Rs 7,674.6 crore recorded in the same period last year. However, when compared to the December quarter, losses widened from Rs 6,609.3 crore recorded during Q3FY25. Revenue for the quarter came in at Rs 11,013.5 crore, registering a 0.93 per cent sequential decline. For FY25, Vi narrowed its losses to Rs 27,383.4 crore, down from Rs 31,238.4 crore in FY24.
Average revenue per user (ARPU) continued to rise sequentially by 0.6 per cent to Rs 164, impacted by fewer working days in Q4FY25. Vi lost 1.6 million subscribers versus 5.2 million in Q3FY25. 4G subscriber base increased 0.4 million QoQ to 126.4 million. Nuvama said that the company continued to lose customers on account of customers upgrading to 4G/5G mobile handsets and weak network coverage in the outskirts.
This is important in the light of Vi’s total debt, including bank loans and long-term liabilities linked to spectrum and Adjusted Gross Revenue (AGR), which stands at Rs 1.97 lakh crore.
AGR, debt woes persist
Vodafone Idea owes Rs 83,400 crore in AGR dues to the government and had sought a waiver on over Rs 45,000 crore comprising interest, penalty, and interest on penalty. However, the company’s last hopes of getting relief in its AGR dues have hit a wall, with the government reiterating that no waiver request can be entertained. This came barely two weeks after the Supreme Court rejected its plea for a waiver on related payments.
Today, Telecom Minister Jyotiraditya Scindia told CNBC-TV18, “The Supreme Court has ruled on the matter, and that’s where it stands. There is nothing on my table at this point.”
The telecom company, meanwhile, is in talks with banks to obtain debt financing for its long-term growth plans, CEO Akshaya Moondra said during a call with analysts to discuss Vodafone Idea’s Q4 earnings. He noted that banks would require clarity regarding the company’s outstanding dues to the government before committing to provide loans. The company board has approved a fundraise amounting to Rs 20,000 crore in one or more tranches.
Moondra had said that Vi is set to incur capital expenditure of Rs 5,000- Rs 6,000 crore for the first half of 2025-26 to enhance its network and infrastructure and its next leg of spending would be dependent on funds from banks.
Key challenges on the road to recovery
Despite the efforts to raise equity and ramp up capital expenditure, three major challenges continue to cast a long shadow on Vi’s path to recovery.
Funding uncertainty remains a core risk
The biggest concern weighing on Vi’s future is the lack of progress in securing fresh debt funding. Although the company received an equity boost—mainly by turning government dues into shares—it still has a long way to go to raise the money it needs to survive and grow. While the management is targeting Rs 20,000 crore through various modes, including bank borrowings, tangible outcomes remain elusive. Motilal Oswal reiterated, “With no relief so far on AGR dues (repayments commence Mar’26) and no breakthrough on the debt raise, we believe Vi is likely to face an annual cash shortfall of Rs 200 billion and may be unable to meet its capex guidance of Rs 500-550 billion over FY25-27.”
Without securing new funds soon, the company will struggle to expand its network, compete with larger rivals, and meet its spectrum and AGR dues. Nuvama noted that the funding delay creates a persistent overhang regarding Vi’s viability.
Subscriber base still shrinking
Though subscriber losses moderated in Q4FY25 with a decline of 1.6 million compared to 5.2 million in Q3, the trend remains negative. The total number of subscribers fell to 198.2 million, with Vi losing about 130 bps of market share in FY25. Even though there was a slight increase of 0.4 million in 4G users, overall growth in data subscribers stayed weak.
Motilal Oswal said, “Vi’s continued subscriber losses and weaker data net adds remain key concerns. Despite potential acceleration in network investments, we believe regaining subscribers will remain a tall ask for Vi, given that peers— with superior free cash flow generation and deeper pockets—can keep customer acquisition costs higher.”
Further, the company’s network investments also remain contingent on debt raise, which, in turn, is dependent on continued support/ AGR relief from GoI.
Balance Sheet Still Under Strain
Even after accounting for the Rs 369.5 billion equity conversion of government dues, the company’s net debt stood at Rs 1.87 trillion. Vi still owes the government Rs 1.95 trillion for deferred spectrum and AGR liabilities. Even as FY25 capex reached Rs 95.7 billion (in line with guidance), sustaining or expanding this level of investment hinges entirely on raising new debt.
Nuvama said, “Management indicated bank borrowings to be the preferred mode of incremental fund-raising, with discussions currently underway. The conversion of the government’s stake and waiver of bank guarantee requirements are aiding ongoing negotiations. AGR dues, including accrued interest, stood at Rs 760 billion as of March 2025.”
Making things worse, repayments on AGR dues begin from March 2026. Since it’s unlikely to generate positive free cash flow soon, there are doubts about whether it can meet these payments.
To conclude, Vodafone Idea has taken several necessary steps including equity conversion, capex ramp-up, and cost control, but the company’s survival hinges on securing fresh funding and governmental support. Without these, Vi’s turnaround plans may not help the company out of the woods.
Both Nuvama and Motilal Oswal remain cautious.