The delay by the government in converting Vodafone Idea’s debt into equity is holding back capital expenditure in 4G and 5G network rollout.

Akshay Moondra, CEO of Vodafone Idea, told analysts that the company will be able to bring in fresh funding from investors only after the government converts debt worth ₹16,000 crore into equity. According to analysts who attended the post-earnings call, Moondra also said Vi is open to issuing convertible bonds to big vendors against outstanding payments to tide over the immediate funding crunch.

Last year, the government gave telecom operators an option of paying the interest for four years of deferment on the deferred spectrum instalments and AGR (adjusted gross revenue) dues by way of conversion into equity. Vodafone Idea decided to take up the offer in a bid to attract financial investors.

Stalemate continues

The Vodafone Idea board also approved the proposal to raise ₹25,000 crore of funds last year. Promoters have already infused ₹4,500 crore of fresh equity. In May, the operator had said it was set to get ₹20,000 crore in fresh funding — ₹10,000 crore of this will be equity, and the remaining from fresh bank loans.

However, the banks have refused to provide fresh loans until the government converts a part of its debt into equity or existing promoters — Vodafone Plc and Aditya Birla group — infuse fresh capital into the company. Capital infusion by promoters was also one of the unsaid conditions laid down by the government when it consented to convert ₹16,130 crore of AGR dues into equity amounting to 33 per cent stake in Vodafone Idea in October last year.

The promoters, however, have indicated that they do not want to pump more money into the loss-making venture. The stalemate is hurting Vodafone Idea’s chances of survival even as rival operators — Reliance Jio and Airtel — are investing heavily into rolling out 5G services.

‘Will underperform’

“We expect Vodafone Idea to continue to underperform peers; the company has lost about 19 percentage points of revenue market share over the last four years, and we believe Vi could lose more share if its 5G rollout is unable to keep pace with peers, which could result in a sizable proportion of its high-end subscribers churning out,” analysts at Goldman Sachs said in an equity research report.