Vodafone may have to raise tariffs to meet a Rs 6,400 cr shortfall by Sept

Goldman Sachs said Vi would need a sharp capital raise or a tariff increase to remain competitive. It is the only telco which has not yet given a timeline to launch its 5G services

Vodafone Idea may have to raise tariffs or finalise its fundraising quickly to avoid a cash shortfall to the tune of Rs 6,400 crore by September 2023, according to a report by The Economic Times.

The report, citing analysts, said if the loss-making telecom service provider fails to raise fresh capital soon, it may have to boost its average revenue per user significantly, or ARPU, to service a debt repayment of Rs 9,600 crore in the next 12 months.

The company has been trying to raise Rs 20,000 crore in debt-equity from outside investors since 2020. While promoters Aditya Birla Group and Vodafone Group Plc provided an equity infusion of Rs 4,500 crore earlier this financial year, more was needed.

According to the company, it has to pay around Rs 9,600 crore of debt by September next year, but the gross cash balance until September 2022 was just Rs 200 crore. The telco needs cash to roll out its 5G services and also invest in the existing 4G network to remain afloat against its rivals Jio.

"So without a capital raise, ARPU for Vi will have to rise by Rs 35 for the company to be able to meet its immediate repayment needs by Sep' 23," Goldman Sachs said, adding the upcoming debt repayment is likely to put more pressure on VI's capex ability.

The global brokerage said Vodafone Idea would need a sharp capital raise or a tariff increase to remain competitive. It expects a tariff increase is likely this quarter.

Vi has not yet given a timeline for its 5G services launch.

"Vi has bought enough 5G spectrum and requires capital only for rolling out the network, but aggressive deployment is dependent on the company's ability to raise more capital, especially as peers are gearing up for faster 5G deployments," ICICI Securities said.

Vi's CEO Akshaya Moondra has downplayed 5G worries, saying the handset ecosystem would take time to evolve and the telco would be able to roll out the latest services quickly if the funding could be secured in a few months.