The Supreme Court’s decision to reject the curative petitions on adjusted gross revenue (AGR) could hit Vodafone Idea with a financial crisis in the second half of next year, when annual spectrum and AGR payments to government of $4-5 billion per annum become due, according to analysts.

“Tariff outlook has been improving, but without AGR concessions, it would take at least 25-30 years (15 per cent ARPU Cagr) for Vi to organically pay back its obligations, and as such, further repayment timeline extensions are required. In our base case, we continue to see market-share erosion and meaningful equity dilution risk,” said a research report from Macquarie.

“Given VI’s still-unresolved fundamental balance sheet and cash flow challenges, our base case with 50 per cent probability remains a ‘VI chug-along scenario’ with steady market-share erosion to Jio and Bharti,” it added.

AGR dues

According to CLSA, Vodafone Idea had self-assessed AGR dues at $2.6 billion, against the DoT estimate of $7 billion and had paid $1 billion. In 1QFY25, Vi’s debt included $8.5 billion for AGR, besides $17 billion for spectrum.

Vi was betting on getting relief from the Supreme Court to sustain its business. Earlier this year the company raised ₹18,000 crore through an offer for sale. It was in talks with banks to raise another ₹20,000 crore. However, the fund raise may not be enough for the operator to settle its AGR and spectrum dues.

 VIL’s revenue market share has declined to an all-time low, with market share loss in 16 out of the 22 circles.

VIL’s Q1FY25 market share was 50 bps (basis points) lower versus FY24 and at 15.5 per cent is at an all-time low. VIL lost 50-170 bps share in the more urban-centric Metros and A-circles and a lower 10-20 bps market share in B and C circles.

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