Vodafone Idea's ₹35,000 Crore Loan Bid Faces Fresh Lender Scrutiny
Lenders to the embattled telecom operator Vodafone Idea Ltd are conducting a detailed examination of the company's spectrum dues, subscriber losses, and weak user revenue before making a decision on its request for a fresh loan of ₹35,000 crore. This scrutiny comes despite recent government relief on adjusted gross revenue (AGR) dues, highlighting ongoing concerns about the company's financial health and competitive position in the Indian telecom market.
Updated Viability Study and Lender Concerns
An external techno-economic viability (TEV) study, originally conducted in 2024 to assess Vodafone Idea's creditworthiness, will be updated with new projections rather than conducting a fresh study. This update will incorporate the recent court relief on AGR dues, which was granted after the initial TEV was submitted. However, lenders remain wary, as one anonymous source involved in the discussions noted, "While the AGR issue has been settled, lenders have no clarity on the telco’s spectrum dues, which are substantially higher than AGR."
The earlier loan proposal was based on performance assumptions that will now be compared with actual data. Vodafone Idea has been cooperative in providing necessary information to aid this process, which will culminate in lenders discussing the plan with the consortium. The final decision on the loan will be made following these discussions.
Financial Struggles and Competitive Challenges
Vodafone Idea has been grappling with significant debt, fundraising challenges, and a steady loss of subscribers due to its inability to upgrade its network and expand reach. Since the TEV study was conducted, the company has lost 7 million subscribers. Its average revenue per user (Arpu) stands at ₹172 per month as of December-end, significantly lower than Reliance Jio's ₹213.70 and Bharti Airtel's industry-leading ₹256 per month as of September-end.
Banks are particularly concerned about Vodafone Idea's lower Arpu, which is compounded by limited access to 5G networks, making it difficult for the company to generate sufficient cash flow to service its debt. A banker, who also requested anonymity, stated, "We have less than ₹500 crore exposure to Vodafone Idea and will assess the proposal once we have more details." The lenders' consortium is led by the State Bank of India (SBI), and Vodafone Idea owes ₹1,126 crore to banks as of 31 December, according to a company statement from 27 January.
Debt Overview and Government Relief
Vodafone Idea's total debt as of December-end is ₹2 trillion, comprising ₹87,695 crore in AGR dues and ₹1.25 trillion in deferred payment obligations towards spectrum, including interest accrued but not due. The Supreme Court's verdict in October and November last year allowed the government to reassess and reconsider all AGR dues as of FY17, providing a crucial breather for the cash-strapped company. This relief was essential, as Vodafone Idea had previously indicated it might not be able to operate beyond FY2025-26 without it.
The government is currently recalculating AGR dues to arrive at a final number. An official aware of the matter explained, "Already, the freezing of AGR dues and a long moratorium on payment has resulted in significant relief for Vodafone Idea. That relief should help the company raise bank debt." However, spectrum dues remain a concern, with no additional relief currently planned. Last year, the government converted ₹36,950 crore of spectrum dues into equity, taking a 49% stake in the company.
Capex Plans and Growth Targets
In addition to spectrum payments, Vodafone Idea recently unveiled a ₹45,000 crore capital expenditure plan over the next three years. The company aims to invest in network deployment and marketing to achieve double-digit revenue growth, sustained subscriber additions, and a threefold increase in earnings before interest, tax, and depreciation (Ebitda). Abhijit Kishore, CEO of Vodafone Idea, emphasized in an earnings call that the company has baked spectrum payments into its cash flow and is not seeking a moratorium on these dues.
Vodafone Idea hopes that the resolution of AGR dues will facilitate raising ₹35,000 crore in bank debt, including ₹10,000 crore in non-funded debt, without needing to raise equity capital at this time.
Analyst Perspectives and Future Outlook
Telecom analysts express skepticism about Vodafone Idea's aggressive targets. They project the company's cash Ebitda to be around ₹9,100 crore in FY26, similar to FY25's ₹9,200 crore, but note that the three-year Ebitda target of ₹30,000 crore is ambitious. A turnaround is heavily dependent on successful fundraising, as highlighted by Kotak Institutional Equities, which warned of a significant cash shortfall without external equity or relief on spectrum dues.
Analysts also echo lender concerns about subscriber losses. Vodafone Idea's mobile subscriber base fell to 193 million as of December-end, down from 200 million a year ago, while rivals like Reliance Jio and Bharti Airtel continue to grow. Nuvama analysts noted that while the moratorium provides breathing space, investor attention remains on delayed debt fundraising, which is critical for supporting capex, stemming subscriber losses, and raising Arpu.
In summary, Vodafone Idea's loan bid faces rigorous lender scrutiny amid persistent challenges with spectrum debt, competitive pressures, and subscriber attrition. The company's future hinges on securing necessary funds to execute its growth plans and navigate the tough telecom landscape.
