In a significant development for the telecom sector, Vodafone Idea (VI) shares witnessed a remarkable 10% surge, reaching Rs 7.67, following the Cabinet’s approval of a crucial policy change regarding bank guarantees. This decision has particularly positive implications for VI, which faces substantial government dues exceeding Rs 24,700 crore.
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Vodafone Idea Share Price: Impact of Bank Guarantee Waiver
Financial Relief
The waiver of bank guarantees for spectrum purchases up to 2022 represents a major relief for telecom operators, with Vodafone Idea emerging as the biggest beneficiary. The company’s obligation of Rs 24,700 crore, scheduled for submission between September 2024 and February 2025, now stands potentially waived, offering crucial financial breathing space.
Debt Position
- Current net debt: Rs 2.12 lakh crore
- Spectrum dues: Rs 1.52 lakh crore
- AGR dues: Rs 70,300 crore
- Sequential debt increase: Rs 9,300 crore in Q2
Operational Performance
Subscriber Base and Network
- Temporary subscriber loss to BSNL post July 2024 tariff hikes
- Recovery trend observed from August
- Addition of 42,000 4G sites
- Removal of 19,700 3G sites
- Target: 120 crore 4G population coverage by September 2025
Future Plans
- 5G rollout scheduled for Q4FY25
- Capex guidance: Rs 8,000 crore for 2HFY25
- Three-year investment plan: Rs 50,000-55,000 crore
Industry Comparison
Competitive Landscape
- Reliance Jio’s annual BG requirement: ~Rs 4,000 crore
- Bharti Airtel’s requirement: ~Rs 3,000 crore
- Both competitors actively prepaying spectrum dues
Despite the recent 10% rally, Vodafone Idea shares remain down 7% over the past month, indicating continued market caution. However, analysts, including Nomura India, maintain a positive outlook on the stock, citing the company’s strategic initiatives and the potential benefits from recent policy changes. The successful implementation of tariff hikes and network expansion plans, coupled with the financial relief from the BG waiver, could provide the necessary momentum for the company’s turnaround efforts.
Read More: SBI Share Price: Secret Behind SBI Q2 Profit 28% Growth
FAQs
Q1: Why is the bank guarantee waiver significant for Vodafone Idea?
The waiver relieves VI from providing bank guarantees worth Rs 24,700 crore, significantly improving its financial flexibility and potentially facilitating its debt raising efforts. This is particularly crucial given the company’s substantial existing debt burden of Rs 2.12 lakh crore.
Q2: How will this impact Vodafone Idea’s 5G rollout plans?
The financial relief from the BG waiver could support VI’s planned 5G rollout in Q4FY25. The company has already outlined a significant capital expenditure plan of Rs 50,000-55,000 crore over the next three years, which includes 5G infrastructure development.
