Cash-strapped Vodafone Idea (Vi) plans to invest ₹55,000 crore over the next three year for capacity expansion to address the increasing data demand. The capital expenditure plan was disclosed by the telecom company in an investor presentation filed with exchanges today.

In the investor presentation, Vi said that the company has made capital expenditure of ₹2,000 crore in the first half of FY25, while it proposed a capex of ₹8,000 crore for the remaining second half of the current fiscal.

Boosted by the development, Vodafone Idea shares gained as much as 2.5% to ₹8.07 on the BSE, while the market capitalisation rose to ₹55,900 crore. The telecom stock was under stress for the last four sessions, falling over 3% during this period. The largecap stock touched its 52-week high of ₹19.15 on June 28, 2024, and a 52-week low of ₹6.60 touched on November 22, 2024.

In the investor presentation, Vi said that the capital expenditure in the first half of FY25 resulted in a 14% increase in its 4G data capacity. During this period, the 4G population coverage increased by 22 million.

Going ahead, the focus of the capex will be on improving competitiveness in priority circles with improved 4G coverage and rollout of 5G services. The company will focus on expansion of 4G population coverage in 17 priority circles to improve competitiveness, while it also plans to offer 4G on sub-GHz 900 band in 16 circles for better coverage and experience.

On 5G front, the telco will launch and expand services in key cities and geographies. The company plans to expand capacity to address the increasing data demand.

As per the company, Vi has strong parentage with the promoters, Aditya Birla Group and Vodafone Group investing significant capital into the business. The company raised ₹25,000 crore in May 2019 through a rights issue, including ₹17,920 crore contributed by the promoter group. Adding to it, promoter group invested ₹7,000 crore in the company in the last 2 years.

On tariff hike, the company indicated at the possibility of rate increase, saying that prices need further uptick to generate reasonable returns and support future investments. “Before the recent tariff hike in July 2024, the last tariff hike was taken in Nov 2021. Tariffs in India are lower than other comparable markets in the world. Further given inflation, prices need to catch up.”

Earlier this week, the board of Vi approved proposal to raise up ₹1,980 crore through issuance of equity shares and convertible securities to promoter entities, Omega Telecom Holdings Private Limited (up to ₹1,280 crore) and Usha Martin Telematics Limited (upto ₹700 crore). The company will issue up to 175.53 crore equity shares of face value of ₹10 each at an issue price of ₹11.28 apiece.

Last week, Vodafone Plc, a promoter entity of Vi, had sold its remaining 3% stake in mobile tower installation company Indus Towers for ₹2,802 crore. The seller intended to use part of the proceeds to repay its own existing debts.

Vodafone Idea has gross debt of ₹2.1 lakh crore ($26 billion), of which only about $600 mn is owed to banks and financial institutions, with the remainder payable to the government of India towards spectrum ($17.2 bn) and AGR (adjusted gross revenue) dues ($8.5 bn). These government dues are currently under moratorium until October ‘25, after which the telecom operator will have substantial payment obligations. The company’s recent filings show that its repayment obligation would be $3.3 bn in FY26, rising to $5 bn in FY27 (excluding dues not under moratorium).

Taking into account repayments such as interest expense on new debt, minimum spectrum dues, and other payables, Goldman Sachs estimates Vodafone Idea to have a maximum capex potential of ₹62,600 crore ($7.5 bn) by Mar ’25.

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