MUMBAI: Vodafone Idea’s (Vi) hopes of stabilising its financial future are under threat as its planned Rs25,000 crore debt-raise faces delays following the Supreme Court’s recent ruling on AGR dues.
India’s telecom industry with Jio, Airtel and Vodafone Idea as its three main private sector participants, has been caught in a typical situation; while money power alone can’t win the battle for market supremacy, Vodafone Idea is struggling for funds though rich with growth ideas.
All eyes are on the government, which holds 23.2 per cent equity in the telecom giant, making it Vi’s largest shareholder. This evolving relationship has raised questions over how the government, with its significant stake, might influence the telecom company’s turnaround and prevent further market destabilization.
VI needs urgent funds
Vi’s need for funds is urgent. The telco had aimed to secure the Rs25,000 crore loan by late November to accelerate its 4G and 5G expansion. However, with lenders growing wary after the recent AGR setback, Vi’s access to funds has stalled.
The Supreme Court’s dismissal of Vi’s petition to recalculate its dues of Rs70,320 crore has led banks to request clarity on possible government relief measures before committing further capital. This development has sparked concerns about Vi’s future if it is unable to raise debt and follow through on its capital expenditure plans.
Capex and 5G rollout at risk
Vi’s survival and competitiveness hinge on rolling out Rs50,000-Rs55,000 crore in capital expenditures over the next three years, aimed at boosting 4G coverage and building a 5G network in priority markets.
Without this investment, Vi risks falling behind its rivals, Reliance Jio and Bharti Airtel, who are rapidly expanding their networks and subscriber bases. CEO Akshaya Moondra recently expressed concern over the impact of the delays, stressing that government intervention in the form of dues conversion or bank guarantee waivers could be essential to restart the debt-raising process.
Vi faces further cash flow challenges, including significant liabilities due in 2026 and 2027, when the moratorium on its government dues ends. To continue meeting these obligations, Vi will need bank guarantees totaling Rs24,746 crore, which further complicates the debt-raising effort. The pressure has grown so intense that some analysts now suggest Vi may rely on additional debt-to-equity conversion by the government.
Government’s role critical but limited?
As the largest single shareholder, the government’s interest in Vi’s survival is clear. The telecom sector is essential to the Indian economy, and analysts warn that a Vi collapse could narrow the market to two dominant players, Jio and Airtel, reducing competition and consumer choice.
Market experts like JM Financial and Nomura Research stress that government support through equity conversion or BG waivers could prevent Vi’s collapse and stabilise the telecom landscape.
However, while the government’s stake positions it as a strategic influencer, there’s no indication it will fully nationalise Vi or assume majority control. Instead, the government’s role may remain one of an enabler, balancing its responsibilities to taxpayers with its interest in maintaining a three-player telecom market.
