India caps Vodafone Idea’s annual dues in relief to debt-saddled carrier

The Indian government on Friday capped Vodafone Idea’s long-pending adjusted gross revenue dues at $13.79 million annually over the next six years, easing near-term cash flow pressure for the embattled telecom carrier.

The move sent shares of India’s third-largest carrier up 9% in morning trading, although investors remained cautious about upcoming funding needs to support 5G expansion plans. By early afternoon, the stock pared most of its gains to trade up 0.7%.

The government approved a partial moratorium on the telecom company’s dues on December 31, freezing $9.76 billion in payments and deferring repayments. At the time, Vodafone Idea had not received any communication about the measure.

The dues stem from the government’s method of calculating telecom operators’ licence fees and spectrum charges. Telecom operators, including Vodafone Idea, have long contested the used method.

“Vodafone Idea’s repayment timeline is offering “ease of life” and government backing, which are positives for survival,” said Vinit Bolinjkar, head of research at Mumbai-based Ventura Securities.

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However, he remains cautious, citing the need for a clear funding plan and a robust growth strategy, especially with upcoming 5G investments.

The telecom operator, in which the Indian government holds a 49% stake and UK’s Vodafone Group about 16%, said after the initial six years, the annual payout will be capped at 1 billion rupees ($11.10 million) for the next four years.

The remaining balance will be settled in equal annual installments over the subsequent six years.

The company has reported losses every quarter since its 2018 merger, ceding market share to Bharti Airtel and Jio, weighed down by over $22 billion in debt and struggling to expand their networks as rapidly as their competitors.