19 - 05 - 2026

Vodafone Idea’s user base stabilises, but turnaround a tall ask

Vodafone Idea’s long-term operational turnaround remains challenging despite recent government relief and a stabilisation of its customer base, according to a research report by Kotak Institutional Equities.

“A combination of external debt raise, equity infusion and operational turnaround is required to meet debt repayments and capex targets—a tall ask,” the brokerage firm said, adding it found the three-year EBITDA target “ambitious”.

Vodafone Idea plans to execute a network capital expenditure plan of about ₹45,000 crore over the financial years 2027-2029 to plug 4G coverage gaps and advance its 5G rollout. This is in addition to spectrum, interest, and spectrum usage charge (SUC) obligations totalling around ₹49,640 crore over the same three-year period.

To fund this, management expects total cash inflows of ₹60,000 crore from internal accruals, ₹35,000 crore from new debt, ₹4,700 crore via preferential issues, and ₹10,000 crore from tax and legal refunds.

However, Kotak characterised these projections as overly optimistic, stating, “We find its three-year EBITDA target ambitious”. The brokerage forecasts lower internal accruals of ₹44,000 crore over the financial years 2027 to 2029, which it expects will restrict actual capital expenditure to around ₹35,000 crore.

Maintains SELL rating

The brokerage firm maintained its “SELL” rating on the telecommunications operator, noting that while recent updates provide near-term funding cushion, the company’s structural path forward requires a difficult combination of substantial external debt, equity injections, and a massive operational recovery.

The mobile operator’s earnings before interest, taxes, depreciation, and amortisation stood at ₹4,889 crore for the fourth quarter of FY26, outperforming institutional expectations. The performance beat was driven by lower customer attrition and improved pricing metrics.

Wireless revenue for the fourth quarter reached ₹10,066.8 crore, a 2.8 per cent year-on-year increase and a sequential 0.2 per cent rise. The company’s blended average revenue per user (ARPU) rose to ₹174, up 6.1 per cent compared to the same period last year, supported by premiumisation as its 4G and 5G subscriber mix improved to 66.9 per cent. Management highlighted that customer ARPU, excluding machine-to-machine (M2M) connections, stood at ₹190.

Vodafone Idea’s total paying subscriber base ended the quarter at 19.28 crore, down marginally by 1 lakh sequentially, following a stabilisation in the customer base “for the first time since the merger in August 2018.

AGR DUES

A major relief for the company came from the Department of Telecommunications (DoT), which finalised Vodafone Idea’s Adjusted Gross Revenue (AGR) dues at about ₹64,050 crore, a reduction from the previously communicated figure of ₹87,700 crore. This review provides a benefit of ₹55,000 crore on a net present value (NPV) basis.

The revised payment schedule makes the regulatory liabilities heavily back-ended, requiring a minimum payment of ₹100 crore annually between the financial years 2032 and 2035, followed by six equal annual installments of ₹10,610 crore from the financial years 2036 to 2041.

Promoter support was also reinforced as the board approved the issuance of 430 crore warrants to an affiliate of the Aditya Birla Group at ₹11 per warrant, aggregating to ₹4,730 crore. Furthermore, Kumar Mangalam Birla took over as the Non-Executive Chairman of the board in May 2026.