Shares of Vodafone Idea (VIL) rallied over 14% in Tuesday’s trade, hitting a high of Rs 8 per share, after the Union Cabinet approved waiving bank guarantees (BG) required for telecom operators to secure spectrum purchases up to 2022. The announcement also gave a modest boost to Bharti Airtel, which saw its shares rise by 1% to hit intra-day high of Rs 1604.75.
Significant Relief for Vodafone Idea
Vodafone Idea is expected to benefit the most from the BG waiver, as it owed Rs 24,700 crore to the government, which was due between September 2024 and February 2025. Analysts have noted that the company’s ability to raise funds is closely tied to securing this waiver.
Despite Tuesday’s surge, Vodafone Idea’s stock remains under pressure, having dropped 7% over the past month and a steep 48% in the last six months.
Mounting Debt and Financial Challenges
Vodafone Idea’s net debt increased by Rs 9,300 crore sequentially in Q2FY25, reaching a staggering Rs 2.12 lakh crore, driven by repayments to vendors and banks, as well as spectrum acquisition costs. Of this, the company owes the government Rs 2.23 lakh crore, which includes:
Rs 1.52 lakh crore in deferred spectrum payments
- Rs 1.52 lakh crore in deferred spectrum payments
- Rs 70,300 crore in AGR (Adjusted Gross Revenue) dues
Subscriber Trends and Revenue Outlook
In a post-results note on November 15, Nomura India highlighted subscriber losses as a major concern. The company revealed that it had primarily lost subscribers to BSNL following tariff hikes in July 2024, but a reversal of this trend began in August. Vodafone Idea expects the full impact of these tariff hikes to be reflected over the next two quarters.
5G Rollout and Network Expansion Plans
Looking ahead, Vodafone Idea plans to begin its 5G rollout in key geographies by Q4FY25. The company is also targeting an increase in 4G population coverage to 120 crore by September 2025.
During Q2FY25, Vodafone Idea added 42,000 new 4G sites while shutting down 19,700 3G sites. The company has allocated a Rs 8,000 crore capex for 2HFY25 and plans to spend Rs 50,000- Rs 55,000 crore on capital expenditures over the next three years.
Debt Raise and Spectrum Payment
According to a note from Motilal Oswal, Vodafone Idea has formally written to the Department of Telecommunications (DoT) to waive the Rs 4,700 crore BG requirement for securitizing spectrum installments. The note also emphasized that Vodafone Idea’s debt-raising plans are contingent on the approval of these BG waivers.
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