Vodafone Idea is confident of clearing all its outstanding vendor dues by FY26, the company has told analysts in a recent meeting.
Besides the dues clearance, the company is looking to be 5G ready by the end of FY26, upsell premium plans to consumers, boost its average revenue per user (Arpu) via tariff hikes and 2G to 4G user conversion.
Comments from the company assume significance given its successful fundraise of Rs 18,000 crore through follow-on offer (FPO), and basis this Vodafone Idea is soon expected to raise bank debt of Rs 25,000 crore.
“The stars are finally aligning for Vi following completion of its long-delayed equity raise. The government’s backing, which we view as tantamount to doing what it takes to ensure that the 3-player industry structure stays intact,” said brokerage Citi Research in a note.
According to analysts’ estimates, the company owes over Rs 10,000 crore to Indus Towers and also about Rs 3,000 crore to Nokia.
The brokerage expects Vodafone Idea’s share price to touch Rs 15 in base case and Rs 25 in bull case scenario. According to Citi, the upcoming tariff hikes in the sector will be positive for the company and will help increase its average revenue per user (Arpu) to increase 60% in four years from Rs 143 in FY24 to Rs 230.
Post the elections, the telecom operators are expected to hike the tariffs by 20-25%, which will be crucial to improve their return on capital employed (ROCE). In FY27, analysts expect a similar hike of 20% in the headline tariffs by the operators.
In its meeting with analysts, the company’s management said it expects its capital expenditure to be similar to what peers like Bharti Airtel have done over the last three years. The management said the capex would enable the company to provide seamless services to subscribers, where it did not have service before and upgrade the quality, where the service was inferior to its competitors.
Vodafone has 58% of 4G customers against Bharti Airtel having 72% of 4G customers. The company aims to get more customers on 4G packages to increase Arpu, analysts said.
“We have long maintained that VIL needs three events to play out to survive — capital infusion, liabilities waiver and tariff hikes. With this capital raise, it has achieved one and enabled another,” said brokerage house Nuvama in a note.
“Hence, while overall, VIL is definitely in a better position today; it is not yet completely out of the woods, in our opinion,” Nuvama added.
In FY26, once the moratorium on regulatory dues is over, Vodafone Idea will have an obligation to pay around Rs 29,000 crore to the government. From FY27 onwards, the company will have to pay Rs 43,000 crore to the government till FY31.
Analysts said the management is hopeful of addressing the government dues payment via internal accruals or part conversion to equity by the government.
The company is also hopeful of some relief from the Supreme Court, on the AGR front, given their contention is on the calculation methodology and some errors by the department of telecommunications (DoT) in calculating the liability, analysts said.
On Wednesday, shares of Vodafone Idea closed 2.7% higher at Rs 12.7 on the BSE.
