Vodafone Idea non-executive chairman Kumar Mangalam Birla said on Thursday that generating free cash flow is essential as the telecom operator targets three-year goals for subscriber growth, higher revenue, and increased cash Ebitda.
His remarks follow the company’s strong June quarter (Q1FY27) results, reported earlier this month, which marked its first quarterly subscriber gain since India and Idea Cellular merged in August 2018. Network expansion and rising data consumption have helped the operator reduce losses while growing its revenue and operating profit.
Vodafone Idea’s net loss narrowed to ₹3,754 crore in Q1FY27 from ₹6,608 crore a year earlier. Revenue from operations rose 6% year-on-year to ₹11,689 crore, while Ebitda grew 9.1% to ₹5,034 crore.
“Our business has started to look better on several operating parameters, as we have seen from Q1 results, and we are very hopeful and optimistic that this momentum will continue,” Birla said at the 31st annual general meeting of the company.
In January, Vodafone Idea CEO Abhijit Kishore said the telecom operator was targeting double-digit revenue growth, a three-fold increase in operating profit, and sustained subscriber additions over the next three years, as it unveiled a ₹45,000-crore capital expenditure plan under its Vi 2.0 strategy.
However, market analysts point to a challenging path ahead. “We expect free cash flow losses to widen as Vi accelerates capex programme and spectrum payments start rising,” analysts at brokerage houseSecurities wrote in a note dated 19 August.
According to the brokerage, the telecom operator’s free cash flow turned negative in FY25 and FY26 due to a step-up in capex, generating negative free cash flow of ₹12,340 crore and ₹6,400 crore, respectively, after regulatory payouts.
To achieve its three-year target on cash Ebitda, analysts said the company might also need two rounds of tariff hikes in the next 30 months.
In FY26, Vodafone Idea clocked a 3% increase in revenue from operations to ₹43,571 crore. The company posted a net profit of ₹34,552 crore, compared to a ₹20,217 crore loss the previous year owing to adjustments related to adjusted gross revenue (AGR) relief from the government. In FY26, the company’s cash Ebitda was at ₹9,200 crore.
Capex drive and debt plans
Even as Vodafone Idea shows operational improvement, it is currently seeking ₹35,000 crore in bank debt. It needs the funds urgently to back a ₹45,000-crore, three-year network expansion plan and to pay ₹49,000 crore in spectrum fees over the same period. Earlier this month, the company announced that it had raised a first funding tranche of ₹6,400 crore. This included partial promoter warrant proceeds of ₹1,183 crore and debt proceeds, comprising non-fund-based facilities through external commercial borrowing (ECB) and private Indian banks.
“AGR payments are deferred to 2035, until which we have very small payments to make on that account. Spectrum liabilities have a defined schedule, which is based on the acquisition timing and run up to 20 years since inception… In the next three years, the business plan factors in the payment of all the spectrum dues,” Birla said.
’s deferred spectrum payment obligations stood at more than ₹1.3 trillion at the end of June. Of this total, the company is scheduled to pay ₹9,259 crore in installments by June 2027.
The company is currently expanding its 4G and 5G services across the country. Of the ₹45,000 crore of capex, it has placed orders worth ₹9,000 crore for network expansion.
“Our 5G coverage is now live in more than 200 cities and towns, and you would be happy to know that it is expanding fast. We will be close to 450 cities in the next two to three months alone,” Birla said, adding that the telecom operator is seeing an increasing share of 5G handsets in the market. “5G cost of data generation is lower and we observe that 5G customers continue to consume more data and are thus higher on Arpu (average revenue per user, a key industry metric),” he said.
“India’s Arpu remains among the lowest globally, making periodic tariff rationalisation essential to ensure the industry’s long-term sustainability and ability to earn reasonable returns on capital,” he added.
Broadband plans
Vodafone Idea is currently evaluating the prospects of fixed wireless access (FWA) home broadband, according to Birla. His comments on an FWA rollout are significant in the context of Bharti Airtel’s statement on 5 August that it is scaling back its FWA expansion.
Airtel is shifting its focus back to fiber broadband as high hardware costs and poor customer retention hurt the economics of 5G-based home broadband. Executives at Airtel telco explained that rising memory and chipset expenses hit unit economics, while low entry-level pricing led to high churn. Consequently, Airtel is tightening customer acquisition and deploying the wireless technology strictly where fiber is not viable.
Reliance Jio, meanwhile, continues to expand its AirFiber business.