Vodafone India will survive for now with the promoter financial support but it needs more

• Vodafone Idea’s promoter group entity said it will provide direct or indirect financial support to the extent of ₹2,000 crore.
• With promoter funds, Vi’s survival worries have likely eased at least until the second half of FY26, say analysts.
• It has spectrum installments coming up and vendor outstanding dues are mounting.
• The telco needs to invest more in capex to roll out 5G and improve its 4G coverage.

India’s third largest telecom company Vodafone Idea or Vi will survive for the next two years at least, say analysts as its promoters have assured to provide ₹2,000 crore in funding support.

“The company has received a communication from a promoter group entity confirming that in the event of any fund requirement for meeting its impending payment obligations by the company, it shall provide direct or indirect financial support to the extent of ₹2,000 crore,” Vodafone Idea said in a stock exchange communication on August 14.

These funds which could be via equity or debt is a lease of life it needs. Over the next 12 months, it has to pay up around ₹6,800 crore in debt to the government. It also has a 5G spectrum installment coming up to the tune of ₹1,680 crore to be paid by August 17. However, it has already sought to avail the grace period of 30 days for this payment.

Moreover, its outstanding dues to vendors has mounted to ₹14,100 crore. Its survival had come under the cloud for a long time now, and those worries have eased at least temporarily.

“With promoter’s financial support of around ₹2,000 crore, Vi’s survival worries have likely eased at least until the second half of FY26. Promoter’s financial support and some relief from Government of India and lenders likely to ensure medium-term survival,” says a report by Kotak Institutional Equities.

Yet, its long-term prospects are still in flux. “While near-term sustainability has been ensured due to the government’s reform measures, improved capex as well as continued tariff hikes are required to ensure that VIL remains a strong viable telco in the long term,” says J M Financial which has reiterated a sell rating on the stock.

The burden of loss

Mounting debt and servicing is not the only stress that the telco is under. In addition to interest costs which are widening its net losses sequentially, it’s also unable to invest in its networks — and its subscribers have been leaving in droves.

It has lost 4.5 million subscribers in the quarter — much higher than 2.7 million it lost in the fourth quarter of FY23.

It already spends much less than its peers like Bharti Airtel and Reliance Jio, which have been rolling out 5G networks on an overdrive. To put it in perspective, Vodafone’s capex is at ₹450 crore – that’s a massive 94% lower than Bharti Airtel’s India wireless capex which is at ₹7,800 crore.

Vodafone’s capex on the other hand declined 20% when compared to the previous quarter even as it has a lot of catching up to do in terms of 4G coverage as well as rolling out 5G network. The latest fundraise will also clear the decks for it to improve its diminishing network coverage and 5G rollouts – which it had said it will do on priority once funds are secured.

While these measures might help it carry on with business, much more is needed to be done as per analysts.

“Vi’s survival beyond the first half of FY26 remains contingent on Government of India’s write-off of dues and would require much sharper tariff hikes or continued large equity infusions from strategic investors with deep pockets, in our view,” says Kotak Institutional Equities.