Vodafone Idea unveils ₹45,000 crore capex plan, rules out equity raise

New Delhi: Vodafone Idea on Wednesday said it is targeting double-digit revenue growth, a three-fold increase in operating profit, and sustained subscriber additions over the next three years, as it unveiled a ₹45,000-crore capital expenditure plan under its Vi 2.0 strategy.

To support the capex plan, the telecom operator is looking to raise ₹25,000 crore in bank funding and ₹10,000 crore in non-funded facilities. The company, however, is not seeking equity funding at this time.

The telecom operator’s current funding structure (bank funding and non-funded facilities) is adequate to manage the investment plan, and it may re-evaluate the situation two years down the line for fundraising via equity, Abhijit Kishore, chief executive officer of Vodafone Idea, said at an analyst meet in Mumbai.

The proposed investment of ₹45,000 crore, combined with the ₹18,000 crore spent over the past six quarters, would take the company’s total network investment to over ₹60,000 crore over a four-and-a-half-year period, the company said at the analyst meet.

To be sure, in May 2024, Vodafone Idea had said it planned to incur capital expenditure of ₹50,000-55,000 crore over the next three years. The company, however, has not been able to raise funding through bank debt to expedite the capex plan. Last month, the company announced that it raised ₹3,300 crore through secured non-convertible debentures (NCDs).

“AGR overhang is behind us…I think to my mind it (relief from the government) is a definitive conclusive long-term solution with a very clear visibility on our cash flow,” Kishore said.

He said the capex will be used for network expansion. The telecom operator plans to achieve 4G parity with competitors across its 17 priority circles, which contribute over 99% of revenue, within 12 to 24 months. Simultaneously, it will expand 5G coverage across urban markets with populations of 20,000 or more over the next 12–30 months. The company will allocate about 70% of capex to radio access, with the remainder to transport and core network infrastructure.

“Through FWA (fixed wireless access), which is on the 5G, we would definitely want to get into the SOHO (small office home office) and the home space, (in) which we are not present right now. We are looking at some options and opportunities as far as getting an entry into a small office or home office is concerned,” Kishore said.

“The ₹45,000 crore capex looks fantastic, but relative to the competition, the number looks underwhelming,” Sanjesh Jain, telecom analyst at ICICI Securities, told the management during the question-and-answer session.

In comparison, Bharti Airtel has been spending about ₹30,000 crore in capex every year, Sunil Bharti Mittal, founder and chairman of Bharti Enterprises, said in a recent interaction with CNBC-TV18. “Capex has not come down. We are spending ₹30,000 crore in capex every year. It will continue to be spent.” Mittal explained that investment requirements shift across technologies. If spending slows in 4G, it shifts to 5G, and as 5G deployment tapers, capital is redirected toward fibre, fixed wireless access (FWA), and data centres. “I would say a little more than ( ₹30,000 crore) than less than ( ₹30,000 crore) will be the order of magnitude (for capex),” Mittal said.

Comments from Vodafone Idea’s management have come at a time when the telecom operator has got a breather from the government on payment of its adjusted gross revenue dues. The Cabinet on 31 December decided to freeze the company's ₹87,695 in AGR dues as of December-end.

“The AGR overhang meant funding was not available. Without funding, investments and deployments suffered. That hurt network experience, impacted brand perception and led to subscriber losses,” Kishore said, adding that the company will soon get past negative customer additions.

After the AGR dues freeze, the telecom company’s total outgo towards AGR payments over the next six years, from March 2026 to March 2031, would be ₹744 crore, a maximum of ₹124 crore per year. It will also have to pay ₹100 crore annually over four years, from March 2032 to March 2035.

The government had approved a payment plan for the company to clear its frozen AGR dues over FY32-41. As per the Supreme Court orders in October and November, the government has also begun the exercise to reassess the company's AGR dues.

While the AGR dues are frozen, Vodafone Idea faces spectrum payment obligations of about ₹49,000 crore over the next three years. The instalment would be approximately ₹7,000 crore in the first year, ₹15,000 crore in the second and around ₹27,000 crore in the third. The company’s total deferred payment obligation (including interest accrued but not due) towards spectrum was at ₹1.25 trillion as of 31 December.

Besides, Vodafone Idea’s outstanding bank debt (including accrued but unpaid interest) was ₹4,424 crore as of December end. The company said the scheduled instalments, payable by December 2026, amount to ₹1,126 crore, including interest.

When asked whether promoters will infuse more funds, Sushil Agarwal, chief financial officer of Aditya Birla Group, said, “As a promoter, we have stood by this company all throughout…Tomorrow, if there is need, promoters will not run away.” He added that the promoters have invested ₹27,000 crore in Vodafone Idea in the last few years.

Analysts said Vodafone Idea would need tariff hikes to reach its 3x Ebitda target of about ₹30,000 crore over the next three years. “Any pricing intervention is a call of a leader, not a call of a challenger. We have always maintained that the industry needs a price repair. We will wait for the leaders to take a call on that, and then we will evaluate,” Kishore said.

In comparison, market leader Reliance Jio has a different stance on tariff hike, which has ruled out any immediate increase, signalling confidence in organic growth in its average revenue per user (Arpu), driven by rising 5G usage.

Vodafone Idea has been losing subscribers. Data shared by the company suggests that over the last 6 years, it has been losing subscribers at a rate of 15 to 16 million customers per year. However, the pace of loss has declined over the last two years, the company said, adding that it is now 5.3 million.

During the quarter, the company lost 3.8 million subscribers, taking its subscriber base to 192.9 million as of the end of December. In the previous quarter, the company’s subscriber base was at 196.7 million. In the year-ago period, the subscriber base was at 199.8 million.

The company said the challenge is less about acquiring new customers (which is decent at around 30% in networked areas) and more about retention. It is hoped that deploying the committed ₹45,000 crore in capex to fill coverage gaps will naturally address retention issues.

During the December quarter, the telecom operator reported a net loss of ₹5,286 crore, compared to ₹6,609 crore in the same period last year. In the previous quarter, the company reported a net loss of ₹5,524 crore.

The narrower loss during the quarter was largely driven by exceptional items, including provision write-backs on remeasurement of settlement assets with its promoter Vodafone Group, amounting to ₹1,228 crore. In the absence of the same, Vodafone Idea's losses would have expanded sequentially and narrowed marginally year-on-year.

The company’s revenue from operations increased 2% year-on-year and 1.15% quarter-on-quarter to ₹11,323 crore, also surpassing Bloomberg’s estimate of ₹11,297 crore. A marginal improvement in revenue can be attributed to the company’s network expansion and increased data consumption on the network.

On Wednesday, shares of Vodafone Idea closed 2.3% higher at ₹10.06 on the National Stock Exchange.