Telecom service provider Vodafone Idea has approached the government for additional support as it struggles to meet its obligations on adjusted gross revenue (AGR) and spectrum dues. In a letter sent to Telecom Secretary Neeraj Mittal on March 11, the company has requested further conversion of its dues into equity.
If approved, this move could increase the government’s stake in Vodafone Idea from the current 22.6% to 49%, according to sources familiar with the matter. The telecom operator is currently grappling with AGR and spectrum dues amounting to Rs 36,950 crore, with an immediate payment of Rs 13,089 crore due in the coming weeks.
Financial Struggles and Previous Relief Measures
Vodafone Idea has stated that it lacks the financial capability to settle the outstanding payments and has sought relief under the 2021 Telecom Relief Package. The company has yet to issue a response regarding the latest developments.
Initially, the government’s stake in Vodafone Idea stood at 33.44% after a conversion of dues into equity worth Rs 16,133 crore in February 2023. However, this stake was diluted following the company’s Rs 18,000 crore follow-on public offer (FPO) in April 2023, bringing the government’s shareholding down to 22.6% as of December 2023.
Government’s Stance on AGR Dues
This appeal comes in the wake of reports that the government has declined to waive AGR dues for telecom firms. Earlier, there were indications that authorities were considering reducing the overall AGR liability, which, if implemented, could have provided Vodafone Idea a relief of Rs 52,000 crore—potentially wiping out 75% of its AGR dues and around 25% of its total debt. Analysts estimated that such a move could have added Rs 7 per share in value for Vodafone Idea’s stock.
In July 2024, Vodafone Idea filed a curative plea with the Supreme Court, seeking a reconsideration of the ruling that required telecom companies to include non-core revenue in AGR calculations. However, in September 2024, the Supreme Court dismissed the plea, further tightening the financial strain on the company.
Vodafone Idea CEO Remains Hopeful
Despite the challenges, Vodafone Idea’s Chief Executive Officer Akshaya Moondra has expressed optimism regarding government intervention. During a post-earnings call in February, Moondra stated, “The government’s intent is clear that it will provide support if needed. It acknowledges the necessity of assistance on this issue and remains the largest stakeholder in the process. We are confident that a solution will be found.”
Financial Performance and Past Government Assistance
Vodafone Idea’s financial performance showed some improvement in the October-December quarter, with consolidated net losses narrowing to Rs 6,609 crore from Rs 7,175.9 crore in the previous quarter.
The company has a history of seeking government support. In June 2021, Aditya Birla Group Chairman Kumar Mangalam Birla wrote to the government requesting intervention amid a severe financial crunch, even offering to hand over his stake to a suitable entity if necessary.
In February 2023, the company’s board approved the issuance of a 33.44% stake to the government in exchange for AGR dues conversion, on the condition that Vodafone Idea would secure additional funding to sustain its operations.
The latest request highlights Vodafone Idea’s continued financial distress and the critical role of government intervention in ensuring the company’s survival in the highly competitive telecom sector. The response from the government remains awaited, and the outcome will likely have significant implications for the company’s future.
