There seems to be no end in sight to Vodafone Idea’s (Vi) woes. In yet another blow to the beleaguered telecom operator, the Supreme Court has rejected its plea on recalculation of outstanding adjusted gross revenue (AGR) dues payable to the government. The telco, along with Bharti Airtel and Tata Teleservices Limited, had filed an application before the apex court seeking correction of arithmetic errors in the outstanding AGR dues calculated by the Department of Telecommunications (DoT). Vi was seriously hoping for a favourable outcome, as the adjustments could have reduced its AGR liabilities by 50-60 per cent. As per DoT’s calculation, Vi owes Rs 584 billion to the government, of which Rs 78.54 billion has already been paid in 2020. The balance is to be paid in instalments by 2031, and Rs 80 billion is due to be paid in March 2022.

With AGR payments diluting its liquidity, Vi had, in June, approached DoT, seeking a moratorium on the spectrum payments coming up in April 2022. In a letter submitted to the department, the company stated that due to the upfront AGR payment of Rs 78.54 billion and the upcoming payment of the first instalment scheduled for March 2022, it would not be able to pay its spectrum dues of Rs 82.92 billion on April 9, 2022. The telco is looking for a one-year moratorium on this payment, as its cash from operations continues to be in a fragile state. It also has to pay

Rs 60 billion as principal repayments for non-convertible debentures that are due in December 2021 and January 2022. Moreover, it needs to renew bank guarantees worth Rs 70 billion in the coming months.

Vi today is the weakest private telco in the Indian telecom market. The benefits it had received from the moratorium on AGR payments in 2020 were short-lived; and nor did its efforts to rebrand itself in September 2020 help alleviate its situation. Its highly leveraged and constrained balance sheet has pushed it way behind its peers in terms of network investments, subscriber additions and ARPUs. The biggest concern, however, remains its inability to raise funds. Its plans to bring in investors have not fructified so far, even as the debt on its books and its outstandings to the government continue to mount. An urgent capital infusion is thus the need of the hour for the telco.

House of cards

Vi continued to report weak numbers for the quarter ended March 2021. Its ARPUs and top line have been impacted by the abolishment of interconnect usage charges with effect from January 1, 2021.

Revenue fell 11.8 per cent quarter on quarter to Rs 96.1 billion. ARPUs declined 11.6 per cent from Rs 121 in the third quarter to Rs 107 in the fourth quarter, returning to the sub-Rs 110 level. This is rather disappointing when compared to the fourth-quarter ARPUs of Bharti and Jio at Rs 145 and Rs 138 respectively. The company’s net loss stood at Rs 70 billion, higher than the Rs 45 billion reported in the third quarter.

Vi reported a meagre cash balance of Rs 3.5 billion on its books at the end of the quarter, while its net debt stood at Rs 1.8 trillion. The weak liquidity position restricts its capability to invest in network upgradation, as is evident from its falling capex intensity. On an annual basis, Vi’s capex spend of Rs 41.5 billion for 2020-21 was almost five times lower than that of Bharti Airtel (Rs 197 billion). At an individual level, Vi’s capex rose in the fourth quarter to Rs 15.4 billion from Rs 9.7 billion in the third quarter (and Rs 10.4 billion in the second quarter), but it is still underwhelming.

Vi continues to lose market share. It lost 2 million subscribers during the fourth quarter and subscriber churn went up from 2.3 per cent in the third quarter to 3 per cent in the following one. This continued subscriber churn has, in fact, diluted the benefits of previous tariff hikes.

The only upside on the subscriber front is the accelerating 4G numbers. The company registered 4.2 million 4G user additions in the fourth quarter as compared to 3.6 million and 1.5 million additions in the third and second quarters respectively. The telco aims to become a 4G-focused operator and added 43,500 4G frequency division duplexing sites in 2020-21, primarily by refarming 2G/3G spectrum.

Data brings hope

Data is the only silver lining for the company at present. Data usage has shot up 8.2 per cent quarter on quarter to 4,856 billion MB, while data usage per mobile broadband subscriber is up 6.3 per cent at 12.8 GB per month. As per Ookla, the telco has outranked its peers in terms of network speeds for three consecutive quarters between June 2020 and March 2021. It launched its voice over Wi-Fi services in the Delhi, Maharashtra, Kolkata and Goa circles during the year.

Vi also acquired 23.6 MHz of spectrum across the 900 MHz and 1800 MHz bands for Rs 19.93 billion during the spectrum auctions held in March 2021. It currently holds 1768.4 MHz of spectrum across various frequency bands, of which 1738.4 MHz is liberalised and can be used towards the deployment of any technology. The telco has time and again stated that its network is 5G ready and that it would roll out the services in India as and when the ecosystem becomes ready for launch. Very recently, it initiated 5G trials in Pune and Gandhinagar in partnership with Ericsson and Nokia.

Going forward, as per the company’s management, the focus will be on investing and expanding in the 16 priority circles that bring in 94 per cent of the telco’s revenue. It has been shutting down its 3G sites and refarming that spectrum to launch 4G sites. In 2020-21, it shut down 30,000 3G sites and is planning to shut down the remaining 3G services by the end of 2021-22. However, it will continue to offer 2G services.

The company has also been looking to tap non-telecom businesses such as enterprise, cloud and digital services. Industry analysts believe that the sector is moving towards an inflection point where the next phase of growth will be driven by businesses beyond traditional voice and data. Vi is already a market leader in the telco internet of things (IoT) connectivity space and accounts for about 54 per cent market share, as per industry estimates. In April 2021, it launched integrated IoT solutions for enterprises, providing secure end-to-end IoT solutions comprising connectivity, hardware, network, applications, analytics and security. The telco is targeting the smart mobility, logistics, smart infrastructure and smart utility segments, and has already tied up with a few companies to this end. Further, it has launched business mobility solutions to power hybrid workplaces and provide seamless digital experiences. These solutions enable enterprises to strike a balance between business objectives and employee mobility. To tap digital revenue streams, the company has been entering into partnerships and collaborations with over-the-top and third-party digital content providers.


Once a formidable market player, the cash-strapped Vi is now staring at an uncertain future. With a raft of issues at hand – delayed fundraising, high subscriber churn, elevated debt, dwindling revenues, capital constraints and outstanding regulatory payments – the road ahead is rocky for the telco.

On its part, Vi is looking to sell its fixed line broadband subsidiary, optical fibre unit and data centre businesses to raise around $1 billion to meet its liabilities. The company also plans to sell the land it had bought to set up data centres. There are, moreover, reports about the company being in talks with US private equity group Apollo Global Management to secure up to $3 billion in funding over the next three months, through a mix of debt and equity. While the company management has refrained from commenting on this development, in its recent investor call, it stated that this move, along with industry-wide tariff rationalisation, will help in improving its current situation.

That said, industry analysts believe that the tide can turn in Vi’s favour only if it manages to bring in substantial cash into the business. As per Credit Suisse, the company’s planned Rs 250 billion fund-raising will help it bridge cash flow needs only until 2021-22, and it will need another equity infusion thereafter.

Vi needs money, and lots of it. Investments in network upgradation and modernisation are crucial as competitors enhance their coverage and capacity, especially with 5G being round the corner. The longer Vi takes to find an investor, the greater will be its challenge to stay afloat.


By Akanksha Mahajan Marwah