State ownership of Voda If the telco doesn’t make yearly payments: CLSA

In September of last year, Vodafone Idea decided to put a four-year embargo on paying its spectrum debt, and earlier this year, it decided to turn the interest on the moratorium, which came to 16,000 crores, into shares that the government would possess to the tune of around 33%. Even though the finance ministry approved the conversion into equity two months ago, the administration has yet to do so. If the No. 3 carrier is incapable of making the approximately $5 billion annual payments, the Indian government may very well own about 88% of Vodafone Idea after FY2026, research group CLSA warned in a note, trying to warn about the situation if the government chooses to transfer the outstanding debt into equity.

Financial limitations will also hinder the provider’s capacity to roll out its 5G network, which has lagged behind competitors Bharti Airtel and Reliance Jio, both of which plan to start offering services this month. The telecommunications company has yet to establish new bank loans and approve the final contracts with vendors for the purchase of equipment.

The strain on its market share will increase because of its low Capex, according to CLSA, as competitors launch 5G services. “Multiple concerns to its 5G rollout plans include funding delays and US$25 billion in government debt despite a four-year embargo.

With 5G auction expenditures included but without rent liabilities, the carrier sponsored by the Aditya Birla Group has a government debt load of 1.98 trillion, or the US $25 billion. With regard to its FY22 debt, which does not include 5G expenditures, 59% of it relates to spectrum liabilities, 34% to adjusted gross revenue, and the remaining 16%, or US$ 1.9 billion, to banks.

Even while the Supreme Court judgment on rectifying calculation errors in AGR was awaited, CLSA stated that AGR relief of US $5–6 billion was essential for Vodafone Idea. In contrast to the department of telecom’s estimate of Rs 58,300 billion or the US $7.4 billion, Vodafone Idea estimated its own AGR dues at Rs 21,500 crore or the US $2.7 billion, and it has already paid Rs 7,900 crore or the US $1 billion.