Concerns mount over Vodafone Idea’s financial crisis

Indian telecom operator Vodafone Idea (Vi) is facing significant troubles in 2023 due to low Capex and the lack of 5G roll out due to fund raising delays and its $26 billion government debt burden, CLSA said in a research report.
Vi 4G network in BhopalVodafone Idea’s financial crisis is growing despite a four-year interest moratorium. Offering equity to India government is pending.

Vodafone India will not be able to meet the about $5 billion in annual payments from FY26.

Vodafone India’s 9MCY22 Capex was Rs.32.6 billion, about 80 percent lower that of Airtel’s India spend.

The Capex lag is unlikely to narrow with the ongoing fundraising delay.

Though Vodafone Idea has acquired 3.3GHz/26GHz 5G spectrum at end 2022, 5G rollout is unlikely in order to compete with Airtel India and Reliance Jio.

Airtel and Reliance Jio are enhancing their 5G business. Airtel is aiming for all-India 5G network coverage by December 2023. Jio is targeting 5G coverage across India by March 2024. The 5G expansion by Jio and Airtel will add risk to Vodafone Idea’s 21 million post-paid subscriber base accounting for over 25 percent of the revenue as these high-end subscribers will likely steer 5G adoption in the country.

The financial crisis for Vodafone Idea could worsen unless the promoters – Vodafone Group of the UK and Aditya Birla group of India — infuse significant capital. The existing promoters  in 2019 injected 73 percent of a Rs 250 billion rights issue to ensure that Vi is surviving in the Indian market place.

Tariff hikes and adjusted gross revenue (AGR) relief could improve Vodafone Idea’s risk/reward profile, but its 17 percent all-India sector revenue share is an increasing target for Bharti Airtel and Reliance Jio, the report said.