Vodafone Idea (Vi), a prominent Indian telecom operator, will require its ARPU (average revenue per user) to jump 2.2x from its current level to meet regulatory payouts from FY27. The current moratorium period on AGR (adjusted gross revenue) dues and SUC (spectrum usage charges) will end in September 2025. Once that is over, Vi's annual payouts will be Rs 35,000 crore in regulatory dues, said JM Financial. This is if the telco's AGR dues are reduced by half if the telco's curative plea with the Supreme Court goes in its favour. Otherwise, the final amount could be higher.
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Vi's ARPU is Rs 146 (Q4 FY24), and the telco is waiting for its competitors to hike prices so that it can do so as well. But for its ARPU to jump 2.2x from the current level, Vi would need multiple tariff hikes in a year, and that's impractical. JM Financial said in a note (seen by ET) that Vi's ARPU needs to reach Rs 320, even if a Supreme Court decision reduces its annual payment to the government.
That's not all though. Apart from the Rs 35,000 crore, Vi's management has also said that the telco is planning to spend Rs 55,000 crore in capex (capital expenditure) in the next three years. This and the annual regulatory payouts will create a very difficult position for Vi. The telco needs to ensure that it can raise additional funds through debt, otherwise, its ship will never be able to reach the shore.
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Vi wants to raise money through debt, however, at this point, the lenders are seeking more clarity on the intent of the government to convert more dues of the telco into stake. The Indian government is already the largest stakeholder in Vi, and thus, if more than 50% stake is acquired by the government, then it will be an interesting situation for the market and the telco (this is purely speculation if 50% or more stake will be with the government after the conversion - if the conversion happens in the first place).
