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Debt pressure ease: Vodafone Idea eyes 5G rollout post ₹24,700 BG waiver by the cabinet

Vodafone Idea Ltd (VIL) stock rose by 10 per cent and traded at ₹7.67 on November 26. It is quite surprising knowing the fact that the stock has edged lower by 7 % in the past month. There was also an increase of 1% share price of Bharti Airtel Ltd. The rally came after the Cabinet cleared the move to do away with bank guarantees or BG that the telecom firms were required to provide for spectrum purchases up to 2022.

Bank Guarantee Waiver impact

This decision will benefit Vodafone Idea. Currently, as per report, the company owes the government ₹24,700 crore in BG, which it was supposed to file between September 2024 and February 2025. VIL’s debt raising efforts, market experts say, are closely linked to getting the BG waivers.

According to a MOFSL note, “Vi has written to the DoT to waive off bank guarantee (BG) requirement worth Rs 24,700 crore (to be submitted from September 2024 to February 2025) to securitise spectrum installments. We believe Vi’s debt raise is also contingent on securing BG waivers.”

Bharti Airtel and Reliance Jio are comparatively less impacted. The total BG requirement from past auctions by Jio is ₹4,000 crore and Airtel’s is around ₹3,000 crore. Prepaying spectrum dues has helped both companies bring down interest costs.

Plans for the Future and Financial Advice

Vodafone Idea will rely on the effect of the hiked tariffs in the next two quarters of the coming financial year. The company aims to launch 5G services in focus markets by Q4FY25 and target 4G population coverage of 120 crore by September 2025.

In Q2FY25, VIL closed down 19,700 3G sites and added 42,000 4G sites. For the second half of FY25, the company has targeted capex net of tax at ₹8,000 crore, with a long-term investment plan of ₹50,000-₹55,000 crore over the next three years. VIL’s decision to earlier withdraw the misused demand had brought significant relief to the Cabinet and the investors had expressed confidence in the restructuring and growth strategy of VIL with the decision taken by the Cabinet.