Govt Still Weighing Options to Help Vodafone Idea After Denying Equity Conversion

After refusing any further equity conversion of Vodafone Idea (Vi)'s Adjusted Gross Revenue (AGR) dues, the government is now exploring other options to support the struggling telecom operator.

This follows last month's Supreme Court decision to dismiss a plea led by Vi and other telecom companies seeking a waiver on interest and penalties related to AGR dues owed to the Department of Telecommunications.

According to a report by NDTV Profit citing top government sources, the Centre remains committed to ensuring fair competition in the telecom sector, which is currently dominated by Reliance Jio and Bharti Airtel. While Vi struggles to stay competitive—marked by a delayed 5G rollout this year—BSNL is undergoing a government-supported turnaround.

Senior officials cited in the report said that discussions are underway in coordination with the Department of Telecommunications to evaluate the legal and financial viability of two to three key proposals.

One of the options under consideration is a moratorium on Vodafone Idea’s pending AGR payments. Another proposal involves encouraging banks to extend fresh credit to the company. In exchange, the government may offer concessions to lenders to reduce their exposure and risk, thereby incentivising their support for the sector. This measure is seen as vital for stabilising the market and maintaining healthy competition.

During its fourth-quarter earnings last month, Vodafone Idea’s board approved a fundraising plan of up to ₹20,000 crore through a combination of equity and debt instruments. The company has also guided for capex of ₹5,000–6,000 crore over the next two quarters, with a large portion expected in Q1.

Vi aims to raise its 4G coverage to 90%, requiring the deployment of around 2.2 lakh broadband sites. However, reaching this target hinges on securing bank loans. Without further funding, the company estimates it can achieve 85–86% coverage, but pushing beyond that will require additional financial support.

Vi management is hopeful that the government’s earlier conversion of ₹36,000 crore in dues into equity—which gave it a 33% stake—has improved the company's standing with banks. CEO Akshaya Moondra also confirmed that discussions with the government have resumed following the Supreme Court’s rejection of the waiver plea.

“I see no reason why the government should be constrained in any way to offer relief,” Moondra said.

The company faces a major EMI of ₹16,000 crore due in March 2026. As of FY25, its total AGR dues amount to ₹76,000 crore.

According to the NDTV Profit report, Vodafone Idea’s situation is unique among private telecom operators because the government holds a 49% equity stake in the company.

This stake was acquired as part of a 2021 relief package that converted interest liabilities into equity. As a result, the government has adopted a more nuanced and proactive approach to addressing Vi’s financial challenges.