Clarity on AGR to help raise bank debt, says Vodafone Idea CEO

New Delhi: Clarity from the government on the issue of adjusted gross revenue (AGR) will move the needle on Vodafone Idea Ltd’s efforts to raise debt from lenders, its top executive said, adding that promoters, along with the management, were in discussions with banks for raising ₹35,000 crore.

AGR is the revenue earned by telecom operators from their core services, such as mobile and internet services. Wireless carriers have asked the telecom department for relief after the Supreme Court dismissed review petition of telecom companies seeking corrections in the AGR calculations.

“As any interested party, the lenders are also looking at what is happening on the AGR matter… I, along with my promoters, are engaged with the bank and we should be able to close once some clarity emerges as to what is happening on the AGR,” Vodafone Idea chief executive officer Akshaya Moondra said during the second quarter earnings call on Thursday.

He also said that any reduction in the AGR liability was not a part of Vodafone Idea’s business plan submitted to the banks, based on which the techno-economic evaluation (TEV) was done by an external agency and submitted to the bank.

“The government remains unequivocally supportive of three private player market and we are engaged with them in finding a solution,” he added.

Also read: Vodafone Idea Q2 net loss narrows to ₹7,175 crore, Arpu rises to ₹156

Bank guarantees

On the issue of waiving bank guarantees of ₹24,500 crore, Moondra said that it had asked the government to do away with the need for submitting bank guarantees for previous auctions as has been done in case of auctions since 2022.

Seeking bank guarantees was reducing its ability to raise debt since banks were not willing to offer up the guarantees, Moondra said. “It is very clear that the bank guarantee is something which the banks themselves will not be very willing to offer. They are trying to get debt funding, which will go towards making investments (and)... help in improving our performance and then improving our cash generation. Bank guarantees will not have that result.”

Moondra added that the company had cash reserves of about ₹13,600 crore which was sufficient to execute the planned capex of ₹8,000 crore for the second half of the financial year. The No 3 carrier has planned a total capex of ₹55,000 crore for three years, which includes ₹24,000 it raised from the markets early this year through the largest FPO.

While the moratorium on payments of spectrum bought in 2022 auctions ends in September 2025, it has to pay ₹27,230 crore as the first installment from October 2025 to March 2026. Moondra said the option of converting dues to equity remained with the company as it was part of the reforms package announced back in 2021. It would have time till the end of the moratorium to reduce that outgo and, in case of cash shortfall, the amount due to the government can be converted into equity, he said.

Raising tariffs

The chief executive said that room for raising tariffs at the entry levels remained less, which means that future tariff hikes would happen on the higher end, reiterating the need for tariff rationalization to recover cost of capital. “Customers using more (data) should pay more so that telcos that are investing into networks are able to get adequate return on capital employed.”

Also read: A tale of two loans: Banks queue up for BPCL, put Vodafone Idea on hold

Moondra said the operator’s recent tariff hike had aided the increase in average revenue per user (Arpu) as well as revenue growth, but it will take a few quarters to witness the full impact of the increase.

“Secondly, once 5G consumption is increasing, and starts getting metered and charged, that itself will provide some opportunities that higher consumption you can charge higher. So this is a structural correction, which will require the industry to think alike but I believe this is the need of the time,” he added.

Private telecom operators increased tariffs by 10-21% across plans, which has led to a SIM consolidation or customers with multiple connections retaining only one and letting go of others. VI lost 5.1 million subscribers with increased port-outs to one operator which didn’t raise tariffs, said Moondra. According to the latest portability data till October, port-outs to BSNL were declining post August, he said.

The turnaround in customer loss, he said, should happen by the end of the year.

Also read: Vodafone Idea to offer 5G in Mumbai, Delhi by Dec, pricing strategy in the works

Vodafone Idea’s losses narrowed to ₹7,175 crore in the September quarter, down from ₹8,746 crore a year earlier, as revenues edged up to ₹10,932 crore from ₹10,716 crore.

Average revenue per user (Arpu)—a key profitability indicator—rose to ₹166 from ₹142 a year ago and ₹154 in the prior quarter, driven by tariff hikes executed in June and the actual effect kicking in from the September quarter.