Vodafone Idea Shares Jump 18% on Cabinet’s Relief

Shares of Vodafone Idea (VIL) surged by over 18% today on November 26, reaching Rs. 8.29 per share, following the Union Cabinet’s approval to waive bank guarantees (BG) required for spectrum purchases prior to 2022. This decision is to ease the financial burden on telecom operators.

Vodafone Idea

This waiver couldn’t have come at a better time for Vodafone Idea, which owes Rs. 24,700 crore in bank guarantees due between September 2024 and February 2025. Analysts believe this decision will improve the company’s ability to raise funds, something it desperately needs to keep its head above water in this intensely competitive market.

The Debt Load

Vodafone Idea’s financial struggles are no secret. Its net debt has ballooned to Rs. 12 lakh crore by Q2FY25, up by Rs. 9,300 crore from the previous quarter. The bulk of this is owed to the government, Rs. 1.52 lakh crore for deferred spectrum payments and Rs. 70,300 crore in adjusted gross revenue (AGR) dues. Recent defaults, including one of Rs. 350 crore this month and another of Rs. 4,600 crore in September, only highlight its cash crunch.

5G Rollout & Capex 

Looking ahead, the company plans to roll out 5G services in select areas by Q4FY25 and expand 4G coverage to 120 crore people by September 2025. In Q2FY25, it added 42,000 new 4G sites while shutting down 19,700 3G sites. It’s also budgeting Rs. 8,000 crore in capex for the second half of FY25 and Rs. 50,000-55,000 crore over the next three years.

Financials  

Despite challenges, Vodafone Idea reduced its Q2FY25 loss to Rs. 7,176 crore from Rs. 8,737 crore a year ago. Revenue rose to Rs. 10,932 crore, and average revenue per user (ARPU) improved to Rs. 166, up 7.8%. The subscriber base stood at 205 million, with 125.9 million 4G users.

All in all, the BG waiver is a lifeline for Vodafone Idea, giving it a chance to stabilize finances and stay relevant in the market. While the situation ahead looks steep, this relief could buy the company time to execute its plans.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.