Government may also convert Vodafone Idea's AGR and spectrum dues into equity: Analysts

After converting Vodafone idea's accrued interest on adjusted gross revenue (AGR) dues into equity, the government may also convert outstanding dues on spectrum and AGR after the four-year payment moratorium is over, said analysts.

"Our base case remains that (Vodafone) Idea will be a going concern and we assume in the long term a part of outstanding dues on spectrum and AGR will also be equitized by the government," JP Morgan said in a report.

After the moratorium period of Q3 of FY26, Vi's payout to the government will include the deferred payments granted in the September 2021 relief package. Kotak Institutional Equities estimates that Vi's overall annual payouts in this case would total around ₹43,000 crore, with ₹15,700 crore for the deferred spectrum base amount, ₹10,000 crore for interest on deferred spectrum payouts due to moratorium, ₹9,100 crore for AGR dues base amount and nearly ₹7,400 crore toward interest on AGR dues deferral.

Out of the expected annual regulatory payment, "the deferred component of ₹17, 400 crore can potentially be converted into equity by the government," Credit Suisse said. "VIL management did highlight the possibility of further stake increase by the government in case VIL is not able to meet its regulatory obligation".

Kotak added that Vi has nearly ₹8,000 crore external dues coming up for repayment in next 12 months and around ₹15,000 crore in overdue vendor payables.

"As per management, Vi continues to engage with lenders for refinancing part of the upcoming debt repayments and with vendors/government for more flexibility in payment terms for service/license fees," Kotak said.

It added that with the government's keenness to protect a 3+1 player market structure and Vi's significantly lower external debt (₹13,000 crore in overall ₹2.3 trillion debt), it expects part of the loans to get refinanced, which could lead to improved payment terms for Indus Towers.

Vi's cash crunch - it had a cash balance of ₹160 crore at December end - has meant it has been unable to invest meaningfully in expanding 4G networks and roll out 5G services, leading to consistent subscriber losses to rivals Reliance Jio and Bharti Airtel.

Vodafone Idea lost 65 basis points subscriber market share in the fiscal third quarter compared to 35 and 30 bps growth for Airtel and Jio, respectively.