After the government refused to increase its stake in Vodafone Idea beyond the existing 49 percent, the telco has hit a roadblock in its fundraising initiatives to pay the AGR dues over the upcoming six years and support its future business prospects. In the meantime, the government is said to be considering other ways to enable the telco to sustain its business and pay the AGR dues simultaneously, an ET report states. 

In a rapidly growing landscape, the telco faces cutthroat competition from players like Reliance Jio and Bharti Airtel, which makes the challenges more testing. Among the alternatives, one is to allow the telco to pay the dues over 20 years, from the current 6-year period. But considering the landscape—financial and operational, the telco won’t be able to sustain its operations beyond 2028-29, facing an imminent cash flow crunch, the report states, a source claiming the same. 

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Ruined Finances

The Department of Telecommunications (DoT), taking into account the existing and potential future financial metrics of Vi, has concluded that if the company is required to pay the full ₹18,064 crore installment due by the end of FY26, it would not have funds to meet the liability in FY27.

In addition to this, even if the annual installments are brought down to ₹6,000-8,500 crore each by extending the payment period, it still would not bring any tangible benefits. In fact, given the telco’s cash flows, it may not meet the liabilities beyond 2028-29. If considering the worst-case scenario, the payment period could be as long as 50-100 years, the ET report claims, citing an official.

Telco Unable to Pay

“The company had shown its inability to meet the post-moratorium payment schedule of spectrum and AGR payments during various meetings with DoT,” said a third official. The telcos’ projected payment was more than ₹30,500 crore before the government converted part of the dues into equity.

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Brokerage firms like Motilal Oswal and auditors like Btliboi & Associates have cautioned about the absence of relief from the AGR dues and that its financial performance is in a bad state, as the company is unable to generate cash flow that can sustain its operations. 

Vodafone Idea reported a net loss of ₹7,166 crore for the January–March quarter, higher than the ₹6,609 crore loss in the previous quarter. The company's board has approved plans to raise up to ₹20,000 crore via equity or debt, with ongoing discussions underway with potential lenders.