Vodafone Idea Limited (VIL), the third-largest telecom operator, will benefit from the government's decision to waive bank guarantees (BGs) for spectrum auctions since 2012. Vi (Vodafone Idea) would be required to pay around Rs 24,800 crore in BGs had this decision not been made. According to Citi Research, this decision from the government will aid the telco in raising funds via debt. Vi has previously said that it is looking to raise around Rs 25,000-30000 crore via debt to fund its infrastructure development.
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Lenders were waiting eagerly for the government's decision on the matter. Since this roadblock is now gone, Vi will find it relatively easier to raise funds in debt.
"This is a major relief for Voda Idea which was not in a position to provide these BGs (Rs 24,800 crore) and which was, in turn, proving to be a stumbling block in its efforts to raise debt funding from banks," said Citi Research in a note on Monday, according to ET.
In 2024, Vodafone Idea raised around Rs 24,000 crore via equity. These funds are earmarked for capex and the revenues that the telco is generating will be used to pay off the debt. Vi has significantly reduced its bank debts in the last two years. This would provide the lenders with some confidence in the telco. However, raising debt won't be very simple even after this decision by the government.
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Vi continues to lose customers to competitors. Despite a tariff hike, the telco's average revenue per user (ARPU) is far behind Reliance Jio and Bharti Airtel. Things are improving for Vi in the network department, and the telco also has plans to launch 5G in the calendary year 2025. It will be interesting to see if Vi is able to raise funds via debt in the coming year, as it would require it to scale capex.
