If it is not able to secure relief from massive government dues, this could be Vodafone Idea’s last operational fiscal in the country, the telecom operator has told the Supreme Court. That would mean that the government’s 49 per cent equity in the company could also “lose (its) value”.
Seeking a waiver on interest, penalty, and interest on penalty — together worth over Rs 45,000 crore — on its Rs 83,400 crore pending adjusted gross revenue (AGR), the company said that the staggering dues were preventing it from raising additional funding. This, despite the government converting an additional Rs 36,950 crore worth of the company’s dues into equity in March.
Vi is among the three privately-owned telecom operators in the country, with the government seemingly intent on keeping India’s telecom ecosystem a three-horse race. However, Vi’s precarious financial situation raises concerns about its longevity in the market.
Why Vi is raising survival fears
In its petition filed in the Supreme Court, seeking a waiver on its dues, Vi said, “without bank funding, (Vodafone Idea) will not be able to operate beyond FY 2025-26, as it does not have the ability to pay AGR instalment of approx. Rs.18,000 crore as per DoT demands due in March 2026”.
The company said that without this funding, its planned investments will not happen and any hopes of an improvement in its operational performance would be dashed.
“More importantly, the funds raised by (Vodafone Idea) will be utilised soon and the entire capex cycle will come to a halt. In such a case, the entire fund raising done over last 12 months and investments made so far by the company, as also the equity stake of the Government including the recent conversion, will lose value,” Vodafone Idea warned in its petition.
“It is impossible for the promoters or any shareholder to invest any more monies in the company. Since the (company) is unable to raise debt in view of precarious financials, if it is compelled to pay amount of Rs. 18,000 crore per year towards AGR dues for next 6 years, the Petitioner will not be able to survive and will face extreme financial stress,” Vodafone Idea added.
Government lifeline
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Vodafone Idea finds itself at this juncture despite receiving a boost from the government earlier this year.
The Indian government now owns close to 49 per cent of the beleaguered telecom company, after it received another lifeline from the Centre, which converted an additional Rs 36,950 crore worth of the company’s dues into equity in March. Before this infusion, the government held nearly 23 per cent in the company. The government is now the single-largest shareholder in the telecom firm. Due to current legal obligations, the government had acquired these additional shares at a premium of more than 47 per cent at the time.
This was the second lifeline that the government has offered to the struggling telco. As part of its 2021 relief package for the company, the government in February 2023 had approved the conversion of Rs 6,133 crore of Vi’s interest dues into equity.
As on December 2024, Vodafone Idea’s total debt was around Rs 2.3 lakh crore. Of this, Rs 77,000 crore was AGR (adjusted gross revenue) liability and Rs 1.4 lakh crore is the spectrum liability.
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The equity conversion was done for the company to be able to pay part of its spectrum dues to the government. Without the move, the company’s would have to pay around Rs 40,000 crore as a yearly instalment after the moratorium expires in September this year.
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