Vodafone Idea running out of options? Govt says won't convert more arrears into equity

Vodafone Idea

Telecom operator Vodafone Idea (VI) faces a major challenge ahead as the Centre said that it has no plan to to convert more arrears into equity, according to The Economic Times. Currently, the government holds 49% in the telecom major.

VI's financial viability, in the absence of  a waiver of its arrears on spectrum usage charges, had become a cause of concern for the government.

The government officials said that other options such as allowing the telco to pay the adjusted gross revenue-based arrears over 20 years, compared to the current six, may not help it as it will still not provide sufficient cash flows to continue operations beyond 2028-29. However, they said that other options are being considered.

"Extending the tenure of AGR payments from the scheduled six annual instalments of Rs 18,064 crore to over 20. But despite that, the long-term sustainability of the company remains in doubt,” one official said on condition of anonymity.

The Department of Telecommunications said that the company will not have funds to meet the liability in FY27 if IT pays pay the entire Rs 18,064 crore instalment due by end-FY26.

Additionally, if the yearly instalments are downsized to Rs 6,000-8,500 crore each by extending the payment period, it will still not have any significant benefits.

Another official said that the in a worst case scenario, the tenure could be as long as 50-100 years. VI's cash and bank balance was at Rs 9,930 crore at the end of March.

Vi's net loss in January-March was at Rs 7,166 crore, more than Rs 6,609 crore in October-December 2024. Addiotnally, the board has approved raising a further Rs 20,000 crore through equity or debt, for which it is in discussions with lenders.