Vodafone Idea will engage with lenders more seriously once FPO funding is in, says CEO

Vodafone Idea's CEO Akshaya Moondra said the industry has a right structure with the telco playing a crucial role to the vast population.

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26 Aug, 2025 12:21

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Vodafone Idea, the third biggest telecom operator of India, said it will engage with a consortium of lenders more seriously once the funding is in from the Rs 18,000-crore FPO. The telco said that the Indian government is supporting its fundraising plan, and its 4G expansion will help it become competitive in the market by reducing churn on its network.

In an interview with Moneycontrol, Vodafone Idea's Chief Executive Akshaya Moondra said that the Indian telecom industry has a right structure with the telco playing a crucial role in offering services to the vast population of the country.

The top executive also reiterated the need to increase telecom tariffs saying that it will help telcos recover their cost of capital and generate free cash. He, however, declined to comment if Vodafone Idea will take the lead in introducing tariff hikes in the country.

Satellite communications, or satcom services, are not a priority area for the telecom operator, but Moondra said it is open to exploring the segment through the partnership route.

Edited excerpts:

Given that 35% of the offer is reserved for retail investors, what demand are you expecting from them? Do you see the entire retail book getting subscribed?

I cannot comment on that, but you have seen our anchor book where we have strong leading international investors like GQG, FMR, UBS, on the domestic side we have HDFC MF, Motilal Oswal MF, Quant MF, SBI General Insurance. Our hedge fund allocation is less than 5%, which is very strong. Rest of it is a book building process so we'll have to see. We have attended brokers’ conferences in Mumbai, Ahmedabad and Rajkot and we have seen positive response.

What role has the government played in pricing the FPO, given that it is the company's biggest shareholder and will see a significant dilution in its stake from 32 to approximately 24%?

You would have seen the statements from the telecom minister and the finance secretary yesterday, they are supportive. The government does not have a role to play in fixing (the price). This is a decision of the company's board, so the board has decided on this price band for the FPO. The government has generally been supportive.

Given that they have the largest stake, can we expect PSU institutions to invest in the FPSO to ensure the deal sails through? Have you had any talks with the likes of LIC for investing in the FPO?

We met a number of investors. There are also institutional investors who will come in the main book. It's not only the HNI and retail who are left. Institutional investors who have not been part of the anchor allocation or whose anchor location was not sufficient compared to what they were looking at could come in the main book. So, there are all categories of investors in the mix.

What is the update on the talks with the banks for funding?

We have been engaged with those lenders for quite some time. Those lenders have been our consortium of lenders for a long time. They wanted that equity should come first, which is now in the process. So we will again engage with them more seriously once the funding is in place. We've had serious engagement, I think we were just waiting for this funding to go first. And we'll quickly engage with them immediately after the FPO.

And how do you plan to spend the amount that has been listed under general corporate purposes?

In general corporate purposes, there is a leeway given by the regulator that it is at your discretion… so we will use it at our discretion in the best interest of our stakeholders.

Do you think the 5G launch will help arrest customer churn at a time when bigger rivals have cornered a good subscriber base?

Over the last year when 5G has been prevalent, we have not seen any change in our subscriber churn trends. If anything, they have been better compared to before, which you can see reflected in our trajectory of net loss of subscribers. So, 5G is a good technology and it has good speeds. The only difference is that on your small device, it does not create an experiential difference between 4G and 5G and that is why customers don't leave just because of it. Anybody who has a 5G-compatible device will want to try it. And that is why we will be rolling out 5G.

Are there other components to arrest subscriber churn?

A single thing that has to do with loss of subscribers is that today our share of new customer acquisitions is higher than our customer market share, which means we are able to attract subscribers beyond our customer market share.

However, why we continue to lose subscribers is because we do not have 4G coverage. So, if there is a subscriber in our area where we do not provide 4G coverage, they have 2G and  want to upgrade to 4G. They have only two choices: either they will leave us or some of them will downgrade us to a secondary SIM and take 4G on somebody else's SIM, in which case they will continue on our network as to 2G subscriber.

Second is that if there's a roaming subscriber who travels to areas where we don't have coverage there again, they will either make us a secondary SIM or they will churn out.

Now, both these cases require us to expand our 4G coverage to match with competition, which is our topmost priority for capex after the funding is available. If today we are able to attract a larger proportion of new acquisitions beyond our market share, I don't see any reason why we will not be able to address the loss of subscribers when we cover the other areas where we are not having a 4F coverage.

So, a strategy to arrest the loss of subscribers is simple. Provide 4G coverage and 5G will be there but 5G is not the reason behind the net loss of subscribers. The lack of 4G coverage, which is significant, is the reason for the loss of subscribers.

Both of your telecom rivals have satcom operations in India. Is this one component you could consider going forward?

We believe that wherever there is a case, and if we believe that it's a little uncertain or it's not the best use of capex, we will not be able to invest that capital, partnership, is always an option.

But more importantly, I think whatever I've been able to understand of this business is that today, satellite business has been thought about, one is for covering far flung areas where normal coverage is not available, because that can be covered through satellite. But it is not a priority area for us.
As I said in our 22 circles also. We are currently not prioritising the 5 circles because we are focusing on either the 17 priority circles or the five remaining circles from the point of view of providing coverage to our roaming subscribers, not the local population, because our position in that market is not strong enough.

And so that may happen later, but today we believe it is not the best use of capital.  so I would put satellite covering the limited requirements of covering far-flung areas and also the fact that it could be used in emergencies… these are not common usage and maybe if there is merit in a telecom operator having that then we could look at a partnership.

How do you see Vodafone Idea’s role in the Indian telecom industry and market structure? 

The role of Vodafone Idea in the telecom industry as a participant in the industry, now, we will have 5G, which we don't have. Otherwise, our offering is pretty much the same as our competitors.
Satellite is currently being contemplated by players; nobody is offering that, and yet there is a divergence of views between two other players in the industry. So I don't think it is happening very soon, but as and when it happens, we will evaluate. But the major growth story today is based on nothing to do with satellites but what exists in the market. And then as I said, we have the right market structure in the country. We have a growing population, less penetration, and an ample opportunity for ARPU increase. And these are the plans which will enable the industry to grow.

We believe we have been a very competitive player in the past. With investments coming in there is no reason why we will not be competitive going forward and participate in the growth story. In fact, whenever you expand your geographical coverage from wherever you are, in the past, you will see that there are improvements in the market share parameters. So we will focus on leveraging our expansion of 4g coverage.

We will be competitive as soon as we can improve our 4g coverage.

How soon will you be clearing the vendor dues?

We are very clear that the funding which we are raising is primarily meant for growth capex. It is not being raised for clearing vendor dues. Vendor dues have to be cleared out of internal accurals. Our bank debt is now down to less than Rs 4500 crore. So our bank debt servicing is less and our cash generation is more. Every quarter we should have a cash generation minus debt servicing surplus and that we will be able to use to clear our vendor dues over a period of time. We are not looking at any one shot clearance of vendor dues.

Can we expect Vodafone Idea to take a lead in tariff hike, which will help increase ARPU?

The need for the industry to see a tariff increase is felt by everyone, and it is a strong necessity, because this is an industry which has operated, not recovering its cost of capital.

And there were only 4G investments and now with 5G investment, the return on capital has gotten worse. Seven years of operating like this, how will the industry ever invest in the growth of the industry going forward?
And it is also the government's expectation that these are the private operators who will then continue to invest in the infrastructure of telecom. So how is that possible unless prices get to a level where people start generating free cash.

Will you also increase focus on enterprise business as margins are high there? 

Besides the growth that we are focusing on in the enterprise segment, we would expect that once our funding is there, and the customers then get the confidence that besides the government support, their survival is ensured and that now we will be back to investment. We would expect some rebalancing of those allocation of shares by our major customers happening where we could go back to our original position.