Why Vodafone Idea shares aren’t excited by the proposed moratorium?

Vodafone Idea shares rallied over 15% last week, before cooling off on Monday. The shares declined in trade despite reports that loss-making telco may get more time (six years) —  after a 5-year moratorium — to pay only 50% of the money it owes the government on account of adjusted gross revenue.Based on a 2019 verdict that allowed the government to retrospectively claim a share of the non-telecom services revenue —  called adjusted gross revenue or AGR — since 1999, Vodafone Idea (now owned by the Aditya Birla Group) owes the exchequer ₹79,000 crore.

The stock isn’t excited because the company may not be able to afford the money that it has to cough up even after the proposed relief.

Gaurav Malhotra, executive director at Axis Capital, estimates the impact of the proposed relief measures at ₹3 to ₹4 a share. “Now, our target price is around ₹9. So, the ₹9 becomes ₹12.5. It really doesn’t swing the needle as much,” he explained.The stock of Vodafone Idea is currently trading at ₹11.5 apiece. Despite bleeding money and losing subscribers, shares of Vodafone Idea have jumped nearly 45% this year so far. “It is amply clear, based on all the interventions, it’s quite evident that they (government) don’t want a duopoly market,” Malhotra said.

However, the government’s intent hasn’t stopped the users from leaving Vodafone Idea, resulting in nine straight years of losses for the telco, and a debt of over ₹2 lakh crore at the end of September 2025.

While the current proposal may defer the payments, it isn’t clear that company will be able to shore up enough profits to pay the mountain of debt on its books.

“There are two major items, which are outflows. One is the AGR, and the second is the spectrum deals. We actually forget that there is a spectrum amount of almost ₹20,000 crore sitting,” Gaurav Malhotra, executive director at Axis Capital, a Mumbai-based broking firm, told CNBC-TV18 on December 15.

Vodafone Idea owes the government ₹1.22 lakh crore on account of spectrum that it has bought, which would also be payable over six years under the proposal currently under consideration.

Here’s how Vodafone Idea’s spectrum liability dues line up over the next few years:

While the fresh relief from the government, which now owns 49% of Vodafone Idea, may provide some breathing space, the company needs to improve its business significantly to meet the obligations starting 2029.

“If you have to pay, say, ₹15,000 crore three years hence, and for just for spectrum, right, then obviously the ₹9,000 crore (cash) EBITDA will have to sort of move up substantially,”  Malhotra added.

EBITDA stands for earnings before interest, tax, depreciation, and amortisation (EBITDA). It measures how profitable a company’s core business is.

Vodafone Idea’s FY25 EBITDA stood at over ₹18,000 crore. However, it includes the amount paid to Indus Towers for renting towers. The amount of ₹9,000 crore cited by Malhotra and other analysts excludes the rent as a cost of operation.

The company has to increase its average revenue per user (ARPU) and that would mean a tariff hike, which even its bigger peers like Reliance Jio (with over 500 million users) and Bharti Airtel (364 million users) have found difficult to implement.

“Tariff hike needs to come for the numbers to be upgraded. The tariff hike has been delayed, but I think so just a matter of time; somewhere between December and June,” Malhotra added.

However, it won’t help Vodafone Idea if the tariff hikes are uniform across companies. What it needs is a competitive edge over the others, both in terms of tariff as well as the quality of service. That would mean more money for capital investments to improve the network coverage and discounts to lure users.

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