Mint Primer | Clear signal: How equity deal can play out for Vi

Subscribe to enjoy similar stories. In the telecom sector, there are certain regulatory payments that an operator has to make to the government. These are for spectrum usage (pre-2022), licence fee as percentage of their adjusted gross revenue, and spectrum purchase.

In Vi’s case, this is the second time the government has converted part of the dues into equity. Vi, which otherwise would have had to pay the dues in cash, has now given it equity shares (49%) to settle part of it. The operator is in financial distress and needs government support to survive.

The government can sell those shares when it wants. As of December 2024, Vi’s total debt was around ₹2.3 trillion. Of this, ₹77,000 crore was AGR (adjusted gross revenue) liability and ₹1.4 trillion was the spectrum liability.

In 2021, as part of the telecom relief package, the government had imposed a four-year moratorium on some AGR dues from spectrum auctions held before 2021. The moratorium is set to expire in September this year. In the absence of any relief, Vi would have had to bear an outgo of ₹40,000 crore every year.

The conversion cuts its debt by 17%, so regulatory payments in FY26 and FY27 are estimated at ₹18,600 crore and 23,600 crore. Analysts say the move eases existential concerns for two to three years. Going by Vi’s free cash flow estimates of ₹15,583 crore in FY25, analysts believe it will need another support from the government in the medium term to stay afloat.

Ambit Capital says Vi needs an average revenue per user (Arpu) of over ₹300 compared with ₹173 to be financially viable. Vi has been looking to raise ₹25,000 crore from banks in debt for long. However, its heavy dues and weak financial position mean the banks have been reluctant to lend