Vodafone Idea Limited — Q1 FY26 earnings call

Call held 18 Aug 2025

Management summary

Vodafone Idea reported a strong Q1 FY26 with revenue growth of 4.9% YoY and a 9.76% YoY increase in reported EBITDA. The company significantly reduced subscriber decline to 0.5 million and added 1 million 4G subscribers, driven by continued investments in network expansion and 5G rollout. While capex for the quarter was ₹2,440 crores, securing new funding for the larger planned capex remains critical, with banks awaiting clarity on AGR dues.

Highlights

  • Revenue for Q1 FY26 was ₹11,020 crores, registering a growth of 4.9% on YoY basis.

  • Reported EBITDA for the quarter was ₹4,610 crores, up 9.76% YoY from ₹4,200 crores in Q1 FY25.

  • Subscriber decline was restricted to 0.5 million, marking the strongest performance since merger and a significant improvement from 5 million in Q3 FY25.

  • Added 1 million 4G subscribers, reaching a total of 127.4 million, indicating improved subscriber metrics.

  • Expanded 4G population coverage to ~84% and launched 5G services in 22 cities across 13 circles, with further expansion planned by September 2025.

Concerns

  • The larger quantum of capex (₹50,000-55,000 crores over three years) requires new funding, for which the company is still engaged with lenders.

  • Banks are currently seeking clarity on the AGR front, which is a bottleneck for securing debt financing.

  • VLR subscriber base declined by 2.6 million QoQ, with management attributing it partly to seasonal weakness and migrant labor movements.

Key financials

  1. Revenue ₹11,020 Cr +4.9%YoY
  2. Reported EBITDA ₹4,610 Cr +9.8%YoY
  3. Reported EBITDA Margin 41.8%
  4. Cash EBITDA ₹2,180 Cr +3.7%YoY
  5. Consumer ARPU ₹177 +14.9%YoY
  6. 4G Subscribers 127.4 Mn
  7. Total Subscriber Loss 0.5 Mn
  8. Capex ₹2,440 Cr

What they filed

Q1 FY27: revenue up 5.8%, net profit up 44.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue10,841 11,024 10,880 10,906 11,068 +2%11,214 +2%11,197 +3%11,539 +6%
EBITDA4,351 4,553 4,420 4,355 4,457 +2%4,602 +1%4,653 +5%4,808 +10%
Net profit-7,210 -6,493 -7,268 -6,633 -5,584 +23%-5,324 +18%52,022 +816%-3,712 +44%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹2,440 Cr this quarter · ₹50,000 Cr (next 3 years) planned Internal cash generation for some capex, but larger quantum requires new funding from banks and other sources.
    • Expanding high-speed broadband network coverage and capacity by adding new 4G sites, upgrading core and transmission network
    • 5G services rollout and expansion
    In Q1FY26, we invested Rs. 24.4 billion capex. We continue to invest towards expanding our high-speed broadband network's coverage and capacity by adding new 4G sites, upgrading our core and transmission network. (Akshaya Moondra, page 4) Capex spends for the quarter was Rs. 24.4 billion. The Company continues to invest in network and will accelerate broader capex plans of Rs. 500-550 billion over three years that we have been mentioning previously once we tie up the bank debt. (Akshaya Moondra, page 11) But the larger quantum of Capex, which is a part of our plan will require new funding to come, for which we have mentioned that we are engaged with the banks and also looking at some other sources of funding, so that we can maintain the continuity of our Capex. (Akshaya Moondra, page 13)
  • Debt Debt disclosed
    • Repayment Bank debt reduced by INR 400 crores or INR 4 billion. ₹400 Cr
    The debt from banks has further reduced to Rs. 19.3 billion as on June 30, 2025. (Akshaya Moondra, page 11) Murthy GVAS: The outstanding as of end of June is about INR 119,000 crores for deferred payment towards spectrum, and about INR 76,000 crore for the AGR. So, totalling up to about INR 195,000 crores. (Murthy GVAS, page 19)
  • Liquidity Liquidity disclosed The company is engaged with lenders for debt funding and also exploring non-banking sources of funding to ensure continuity of capex, especially as banks seek clarity on AGR dues.
    We remain actively engaged with our lenders for tying up debt funding towards the execution of our long-term network expansion plan. (Akshaya Moondra, page 9) Nevertheless, given the fact that we are keen on maintaining a continuity of our Capex, which has been going on since last year, we are looking at nonbanking sources of funding also, not the full amount of INR 25,000 crores that we have talked about, but a lesser amount so that we can continue with the Capex cycle. (Akshaya Moondra, page 23)

Guidance & targets

Capex

  • Total Capex over three years Capex · next 3 years · Medium confidence ₹50,000-55,000 crores
    The Company continues to invest in network and will accelerate broader capex plans of Rs. 500-550 billion over three years that we have been mentioning previously once we tie up the bank debt.

    — Akshaya Moondra

  • Capex for H1 FY26 Capex · H1 FY26 (by September '25) · High confidence ₹5,000-6,000 crores
    In the last quarter, we had indicated that we are looking at about INR 50 billion to INR 60 billion of Capex in H1. I had also mentioned that a large part of it should come in Q1. But the 5G rollout has taken a little while, and most of this will be done by this quarter. So that range of INR 50 billion to INR 60 billion, which we had indicated for H1, we should meet that target by September '25.

    — Akshaya Moondra

5G Coverage

  • 5G expansion to priority circles 5G Coverage · by September 2025 · High confidence all 17 priority circles
    Further expansion to additional key cities across all our 17 priority circles is planned by September 2025.

    — Akshaya Moondra

What to watch in Q2 FY26

Progress on bank debt funding

next quarter
Current Engaged with lenders, but banks seeking clarity on AGR dues
Target Securing debt funding or clear path forward

Why it matters

Crucial for executing the long-term network expansion plan and overall financial stability.

We remain actively engaged with our lenders for tying up debt funding towards the execution of our long-term network expansion plan. (Akshaya Moondra, page 9) The banks are currently looking for some clarity on the AGR front. So that is where we are engaged with the government. (Akshaya Moondra, page 23)

Risks & concerns

  • Delay in securing new funding for capex

    high

    The larger capex plan (₹50,000-55,000 crores over 3 years) requires new funding, and delays could slow network expansion, especially in 2H FY26.

    Management acknowledged

  • Lack of clarity on AGR dues impacting bank funding

    high

    Banks are awaiting clarity on the Adjusted Gross Revenue (AGR) front, which is currently a bottleneck for securing debt financing.

    Management acknowledged

  • VLR subscriber decline

    medium

    VLR subscriber base declined by 2.6 million QoQ, attributed to seasonal weakness and migrant labor, but could impact future revenue.

    Management downplayed

Q&A highlights

2 direct, 1 evasive
Capex trajectory and funding beyond H1 FY26 Direct
As far as Capex is concerned, you are saying that the Capex that is coming out of fundraising in the FPO and other events last year, that will be done by September. And then beyond September, you will only spend what you are earning as cash EBITDA, so around INR 21 billion or INR 22 billion per quarter. Is that the right way to infer your Capex trajectory? Akshaya Moondra: Broadly, yes, there are other pluses and minuses. But yes, directionally, yes.

Clarifies the company's capex spending capacity post-September 2025, linking it directly to internal cash generation in the absence of new funding.

Asked by Vivekanand S.

Net debt increase and reconciliation Partial
Sanjesh Jain: Got it. One question on the balance sheet side. I was just looking at the change in the net debt from Q4 to Q1, it's broadly gone up by INR 7,000 crores. So, we generated broadly INR 2,200 crores of EBITDA and another other income of INR 150 crores, and we have spent broadly the same number in the Capex. So, what explains this increase in the net debt by INR 7,000 crores? Murthy GVAS: Yes. Just to add, Sanjesh, the spectrum or the AGR debt remains the same as last quarter and the external debt has gone down. The cash and cash equivalent has gone down on account of Capex. So therefore, if you take a net debt figure, that movement is slightly there as Akshaya explained.

Highlights a significant increase in net debt despite capex being covered by FPO funds and internal accruals, prompting a need for clearer reconciliation from management.

Asked by Sanjesh Jain

Government stake repurchase feasibility Evasive
Mitul Jani: If the Company performs well, will it be feasible and viable for the Company to repurchase shares by settling the government stake somewhere in the future? Akshaya Moondra: Firstly, technically, a Company cannot purchase its stake. So, it is basically, if at all that was to be thought of, it is promoters who have to buy a stake. A Company cannot buy back its stake, unless you get into a complicated process of reduction of capital. ... That's not a relevant question for today.

Reveals management's disinterest in discussing the government's equity stake and potential future buyback, indicating no immediate plans or legal complexities.

Asked by Mitul Jani

VLR subscriber decline acceleration Partial
Piyush Choudhary: Firstly, on VLR subscriber base, which is down 2.6 million quarter-on-quarter, while that was down 1.2 million in the last quarter. Like what's explaining an acceleration on VLR subscriber being dropping? Akshaya Moondra: All that I can say is that generally Q1 is a seasonally weak quarter. So, if you look at historical data from a quarter-on-quarter variance, Q1 is actually a weaker performance compared to Q4 generally across the industry. In that context, the VLR trend may appear to be in a direction. And sometimes there is also this challenge about migrant labour, moving from one part of the country to another that creates some of these distortions.

Addresses the accelerating decline in VLR subscribers, attributing it to seasonal factors and migrant labor, but without a specific strategy to reverse the trend.

Asked by Piyush Choudhary

Bottlenecks in bank funding for capex Direct
Piyush Choudhary: Can you discuss on the progress and key milestones to watch? What are the bottlenecks based on your discussion with banks? Akshaya Moondra: The banks are currently looking for some clarity on the AGR front. So that is where we are engaged with the government. ... Our request to the government has been that let us resolve this earlier than before the deadline of March, so that banks get clarity and we can proceed with bank funding.

Identifies the lack of clarity on AGR dues as the primary bottleneck for securing bank funding, highlighting the critical role of government intervention.

Asked by Piyush Choudhary

Impact of 5G rollout on churn Partial
Vivekanand S.: So, you are saying that the churn is also due to your network not having 5G coverage. Did I get that correct? And you are now saying that with 5G rollout in more and more cities, churn will come down further. Is that a factor? Akshaya Moondra: Yes. You see it's like this. As we have said in the past that generally speaking, we have not seen a difference in the trend of subscribers who are churning out between people who have 5G devices or not. However, once you start having a particular offering in our network, definitely, it creates a positive feedback or positive sense in the customers who are wanting to use 5G or who are particularly looking for 5G.

Clarifies that while 5G coverage isn't the sole churn driver, it contributes positively to customer perception and retention, especially for 5G-seeking users.

Asked by Vivekanand S.

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Detailed narrative

Indian Telecom Market and Digital India Mission

The telecom sector has been a critical enabler of India's Digital India mission, which completed 10 years on July 1st. It has laid foundational digital infrastructure, empowering millions with wireless broadband coverage, e-governance, and digital literacy. India now ranks third globally in digitalization of the economy, with the digital economy projected to contribute nearly one-fifth of the country's overall economy by 2030. The telecom industry serves as a backbone for national priorities like digital health, online education, fintech inclusion, and smart governance.

Strategic Investments and Network Expansion

Vodafone Idea invested ₹2,440 crores in capex during Q1 FY26, focusing on expanding its high-speed broadband network. The company added over 4,800 new unique 4G towers, increasing 4G population coverage to ~84% as of June 2025, up from ~77% in March 2024. 4G data capacity expanded by ~36%, leading to a ~24% improvement in 4G speeds. 5G services have been launched in 22 cities across 13 circles, with further expansion planned for all 17 priority circles by September 2025. The company also deployed ~13,100 Massive MIMO sites and over 12,300 small cells.

Subscriber Trends and Market Initiatives

The company reported a significant reduction in total subscriber decline, which was restricted to 0.5 million in Q1 FY26, marking its strongest performance since the merger. This compares favorably to a loss of 1.6 million in the previous quarter and 5 million in Q3 FY25. The 4G subscriber base grew by 1 million this quarter, reaching 127.4 million. Consumer ARPU increased by 14.9% YoY to ₹177. Market initiatives include the 'Non-Stop Hero Plan' offering unlimited data, the 'Vi Guarantee Program' providing 130 GB additional data, and expanded international roaming packs to 144 countries, with 40 offering truly unlimited data and calls.

Enterprise Business Growth and Digital Offerings

Vodafone Idea is transitioning into a comprehensive Techco, offering advanced solutions like hybrid SD-WAN, SIP, IoT, and cloud services. Key highlights include the launch of Vi Business CCaaS (AI-powered contact center as a service) and a 10-year contract with Genus Power Infrastructure Ltd for 5 million smart meters. The company also enhanced its Vi App with 'Vi Finance' offering personal loans, fixed deposits, and credit cards through a partnership with Aditya Birla Capital, aiming to create a differentiated digital ecosystem and incremental monetization opportunities.

Capital Expenditure and Funding Outlook

The company has a broader capex plan of ₹50,000-55,000 crores over the next three years, with a target of ₹5,000-6,000 crores for H1 FY26. While current capex is funded by internal accruals and FPO funds, the larger quantum requires new funding. The company is actively engaged with lenders for debt financing, but banks are seeking clarity on the AGR (Adjusted Gross Revenue) front. Management expressed confidence in government support, citing past interventions, and is also exploring non-banking sources of funding to ensure capex continuity.

Debt Profile and Government Support

As of June 30, 2025, bank debt reduced to ₹1,930 crores. The total outstanding for deferred payment towards spectrum and AGR stood at ₹119,000 crores and ₹76,000 crores respectively, totaling ₹195,000 crores. The net debt increased by approximately ₹7,000 crores QoQ. Management noted that the government, as the largest stakeholder, has been supportive in the past, with actions like spectrum installment deferments and conversion of dues to equity. The company has requested the government to resolve the AGR clarity issue earlier than the March deadline to facilitate bank funding.

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