Vodafone Idea hopes for business as usual after resolving AGR dues, on the lookout a COO

The company said it hoped for a resolution "as soon as possible".

The telco with statutory dues racking up over ₹2 trillion noted that while talks with banks and non-banking financial companies are on to raise debt, there is a "dependency" on what the government reassesses.

“We welcome the order from this Honorable Supreme Court and we are pretty hopeful the government being a 49% player to look at a long-term solution and we are engaged with the DoT (department of telecommunications)," Kishore told analysts on Tuesday in his first earnings call after taking charge as CEO.

In early November, the apex court clarified that the government could reassess and reconsider all of Vodafone Idea’s AGR dues as of 2016-17, including interest and penalties. The order provided significant relief to the company.

The central government owns 49% of Vodafone Idea.

The operator added in a statement: “…the group believes that it would be able to get support from the DoT, successfully arrange funds and generate cash flow from operations."

Of the ₹2 trillion dues, the AGR dues of Vodafone Idea alone stands at ₹78,500 crore as on September end. The remaining is mostly the amount that the company owes the government for wireless spectrum purchased in auctions.

AGR represents the income calculated from telecom operators’ total revenues, serving as the basis for regulatory fee payments.

Comments from Vodafone Idea assume significance as the company had expressed survival concerns beyond FY26 in the absence of relief from the government.

COO hunt

The telecom operator is also on the hunt for a new chief operating officer (COO), Mint reported earlier on Tuesday. Kishore, formerly the COO, was appointed as the CEO this August for a three-year term.

“Selection of the new COO is under process, we will update when there is a development," said a company spokesperson in response to Mint’s queries. It is learnt that the next COO could be recruited from outside the company.

The new top deck has its task cut out. They are taking charge at a time when the cash-strapped telco is navigating the contours of relief expected from the Union government, while also facing tough competition from market leaders Reliance Jio and Bharti Airtel.

Vodafone Idea remains engaged with lenders to secure debt financing to support its broader capex plans of ₹50,000-55,000 crore. In August, the company announced that it had begun exploring non-banking sources of funding to maintain the continuity of its critical capital expenditure cycle.

When asked about the capex plans in absence of debt funding, Kishore said the company is looking to spend in the range of ₹7,500-8,000 crore in capex for the current financial year.

“We are not really looking for external funding for this particular capex. It is part of the internal accrual as well as the money that we have," Kishore said.

In the first half of the current financial year, the company incurred capex of ₹4,200 crore to improve coverage of 4G networks and the rollout of 5G ones. Vodafone Idea’s 4G population coverage has increased to over 84% as of September compared to 77% in March 2024. Besides, the company has also rolled out 5G in 17 circles across 29 cities.

“Our sense is that over the next couple of quarters, we should be able to get to 90% (4G population coverage)... The capex that is required would be in the range of ₹4,000 crore," Kishore said, adding that the focus of the current capex spending is primarily towards coverage split between 4G and 5G.

“We firmly believe that the more 4G and 5G sites we roll out we will start to see this (subscriber) trajectory getting positive," Kishore said, ruling out any churn of subscribers to state-owned Bharat Sanchar Nigam Ltd.

Q2FY26 surprise

Shares of Vodafone Idea ended 7.3% higher at ₹10.19 on the National Stock Exchange on Tuesday.

This came after the operator surprised investors with a better-than-expected performance in the second quarter, results for which were announced on Monday. The telco posted a net loss of ₹5,524 crore, lower than the year-ago loss of ₹7,176 crore and below Bloomberg’s estimate of a ₹6,712 crore loss.

The lower losses can be attributed to a reduction in the company’s expenses, particularly finance cost, which include interest payments on debt and other liabilities, accounting for 43% of its revenue from operations. The telco carries debt of ₹2 trillion, with repayments starting next year.

Commenting Tuesday on the reasons for lower finance cost, Vodafone Idea chief financial officer (CFO) Tejas Mehta said, “There (have) been some settlements with some various vendors on account of which we have made some provisions in the previous quarter that are now reversed."

According to Mehta, there was also a slight favorable impact on lower forex fluctuation that helped with the reduction in finance costs during the quarter, too.

CEO Kishore took over the reins from Akshaya Moondra, who was the CFO of Idea Cellular from June 2008 to August 2018. Moondra played a crucial role in stitching the merger of Idea Cellular with Vodafone India in 2018 and was made the chief executive in August 2022.

With 196.7 million customers, Vodafone Idea is significantly behind the subscriber base at Reliance Jio and Bharti Airtel. Jio has 506 million customers and Airtel 364 million.

The company’s average revenue per user (Arpu), a key performance metric among telcos, rose marginally to ₹167 in the latest quarter from ₹165 in the April-June quarter. In comparison, Reliance Jio’s Arpu stood at ₹211.4 and Airtel’s ₹256 in the September quarter.