Signalling clarity on payment approach: Vi may give government more equity to clear its bills

Vodafone Idea (Vi) CEO Akshaya said the telco is looking at further conversions of government dues into equity as well as internal accruals to address payout obligations toward spectrum and adjusted gross revenue (AGR). The moratorium on these payments ends in September 2025.

The statement came during Vi’s FY24 fourth-quarter earnings call Friday. Moondra was responding to a query on Vi’s payment strategy on clearing government liabilities of more than Rs 2 lakh crore relating to spectrum payments and AGR dues.

Vi has to pay Rs 29,000 crore in March 2026 and Rs 43,000 crore in March 2027.

“We are looking at conversions as well as internal accruals via cash generation from operations,” he said.

In February 2023, the government had converted accrued interest of Rs 16,133.18 crore on AGR dues into equity at Rs 10 a share, giving it a 33% stake.
Users can easily absorb tariff hike, says CEO
Following Vi’s recent follow-on public offer (FPO), the government holding was reduced to 23.8%. Analysts said this gave the Centre room to extend the assistance package in FY26 when the moratorium period ends.

Moondra had told ET in April the Centre’s stake could rise back to 32-33% if it decided to convert some of the principal dues into more equity.

The Vi CEO said Friday that any significant tariff hike after the elections should be easily absorbed by users. Mobile services are essential and “not a discretionary spend”, he said.

Telecom tariff structures need to rapidly migrate to a pay-as you-go model with mobile users shelling out more for consuming increasing amounts of data. Such rationalisation of tariff structures was critical for telcos to recover their investments in spectrum and networks, he said. Generous data allowances in phone plans meant much of the usage was “avoidable.”

Bharti Airtel MD Gopal Vittal had also called for an urgent tariff increase a day earlier. Moondra added that the telco is targeting 5G rollouts in key cities over six months.

Vi is busy finalising plans on this score with vendors and holding advanced trials on ORAN (open RAN) and V-RAN (virtual RAN) technologies. The company had already concluded 5G minimum rollout obligations in four circles and applied for this in Bihar and Mumbai.

Having recently raised over Rs 20,000 crore in the FPO, the cashstrapped telco said it’s in discussions with a consortium of banks to borrow up to Rs 25,000 crore and additional non-fund based facilities of as much as Rs 10,000 crore.

Moondra did not give a schedule for the bank funding, saying it continues to be actively engaged with lenders.

Vi’s CEO said a bulk of the targeted Rs 50,000-55,000 crore funding would be used as capex over the next three years to boost 4G coverage, ramp up 4G capacity and kickstart greenfield 5G rollouts in key markets.

Backhaul network enhancements would also be a vital element of the planned 4G coverage/capacity expansions and greenfield 5G rollouts. A portion of the capex would also be set aside for bolstering Vi’s enterprise business. “Lack of (adequate) 4G coverage is the key reason for Vi’s customer losses, and so 4G coverage expansion will be our top priority to fix this problem,” Moondra said.

Vi has already allocated Rs 5,720 crore toward 5G rollout. Of the FPO proceeds, the operator will spend Rs 12,750 crore on network expansion.

Moondra’s comments came a day after Vi said net loss for the fourth quarter widened to Rs 7,675 crore from Rs 6,986 crore in the preceding three-month period amid high debt and customer losses. Vi shares closed marginally higher (0.76%) at Rs 13.25 on the BSE Friday.