Government Lifeline: Vodafone Idea Gets a Breath of Fresh Air

The government has offered vital relief to Vodafone Idea by capping its annual payouts at Rs 124 crore over the next six years. This move eases cash flow and postpones significant dues to be paid annually from March 2036. Shares rose temporarily, reflecting cautious investor sentiments.

The government has thrown Vodafone Idea a critical lifeline, capping its annual payout obligations at Rs 124 crore over the next six years, a move expected to ease the telecom operator's cash flow. This development follows a communication from the Department of Telecommunications (DoT), confirming a reduction in yearly outgo between 2032 and 2035 to Rs 100 crore.

The decision is part of a wider moratorium approved last December, freezing Vodafone Idea's past dues at a staggering Rs 87,695 crore. The amount is set to be reassessed by a committee, with payments scheduled in equal installments annually from 2036. The relief measures aim to preserve government interests, ensure competition in the sector, and safeguard the services for Vodafone Idea's millions of subscribers.

The operator has been weathering significant financial stress, grappling with high debt and intimidating AGR liabilities. While government interventions and equity conversions have kept the company afloat, its long-term viability depends on further policy support and fresh capital influx. Analysts suggest that these steps, coupled with potential favorable reassessment outcomes, could fast-track Vodafone Idea's efforts to secure Rs 25,000 crore in bank funding, vital for its network investments.

(With inputs from agencies.)