A group of banks led by State Bank of India (SBI) may sanction loan of ₹25,000 crore to telecom company Vodafone Idea (Vi). This development comes after the Indian government reduced the company’s dues by 27% last week.
To understand this news, you first need to understand the whole matter related to Vi. Let’s understand.
Vodafone Idea is facing a major financial challenge mainly due to heavy government dues related to AGR and spectrum.
AGR (Adjusted Gross Revenue) refers to the total income on which telecom companies must pay fees to the government, and after a 2019 judgment by the Supreme Court of India, Vodafone Idea was required to pay large past dues along with penalties and interest, which significantly increased its debt burden.
The Department of Telecommunications (DoT) has reduced Vi’s AGR dues from ₹87,695 crore to ₹64,046 crore. So Vi has to pay this amount.
Along with this, the company also has to pay spectrum dues, which are payments for the airwaves it purchased in auctions to provide mobile services.
Vi also has to pay spectrum dues of ₹7,000 crore in FY27, ₹15,000 crore in FY28, ₹28,000 crore in FY29.
These payments are made in installments over many years, but due to financial stress, managing them has become difficult.
As a result, Vodafone Idea’s total debt rose to a very high level, affecting its ability to invest in improving network quality and expanding services. To support the telecom sector, the government has recently provided relief by reducing some dues, extending payment timelines, and converting a portion of dues into equity, making the government a major shareholder in the company.
However, despite this relief, Vodafone Idea still has a significant debt burden, and it may take time for the company to fully recover and improve its services.
Vi, which is the third-largest telecom company in India, has shared a three-year recovery plan. It has also requested for another ₹10,000 crore to meet short-term working capital needs.
The Department of Telecommunications (DoT) has reduced Vi’s AGR dues from ₹87,695 crore to ₹64,046 crore, which is a big relief for the company’s cash flow.
Most of the payments will now be made between FY36 and FY41. This gives the company about 10 years before major payments begin, allowing it time to invest in improving its network.
Even after this relief, banks are still careful about lending to Vi. The company has lost customers to bigger rivals like Reliance Jio and Bharti Airtel.
A person familiar with the matter said that although the company’s situation has improved, no bank wants to take the main responsibility for the loan. SBI is also waiting for more banks to join before moving ahead with the proposal.
Vi plans to invest ₹45,000 crore over the next three years. This fund will be used to upgrade its network and expand 5G services in key areas. The company has already invested ₹18,000 crore.
The company has to pay its spectrum dues. Apart from AGR dues, Vi also has to pay spectrum dues of ₹7,000 crore in FY27, ₹15,000 crore in FY28, ₹28,000 crore in FY29.
Banks say that even after the AGR relief, the company still needs to prove that it can repay its loans as the amount is huge.
India’s largest Bank – SBI, along with other banks, may sanction the loan, as per media reports. More details will be released soon.
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