Vodafone Idea Faces ARPU Gauntlet for Spectrum Debt Survival

AGR Relief Provides Breathing Room

Vodafone Idea (Vi) must almost double its average revenue per user (ARPU) to approximately ₹340 by fiscal year 2029 to manage looming spectrum payment obligations, according to market analysts. This underscores that the telecom operator's financial pressures have only been partially alleviated by recent regulatory adjustments.
The Adjusted Gross Revenue (AGR) framework revision freezes Vodafone Idea's legacy dues at roughly ₹87,695 crore, halting further interest accrual. Annual payments are capped at a nominal rate until FY35, pushing the majority of repayments to FY36 and beyond. Brokerage estimates suggest this translates to around ₹53,500 crore in debt relief through net present value, significantly enhancing near-term cash flow visibility and reducing headline leverage.

Spectrum Payments Remain a Key Hurdle

However, this AGR concession does little to ease the company's substantial spectrum burden, which analysts identify as the more immediate constraint. Vodafone Idea is still projected to pay ₹2,500 crore in spectrum dues in FY26, escalating to ₹7,000 crore in FY27 and ₹15,000 crore in FY28. Annual payments are then expected to climb to approximately ₹27,000 crore between FY29 and FY32. These considerable outflows precede the deferred AGR instalments.

ARPU Growth Becomes Critical Variable

Consequently, ARPU expansion has become a crucial factor. Vodafone Idea's customer ARPU hovers around ₹180, with a blended ARPU of ₹167 as of September 30, 2025. Analysts project it needs to nearly double to around ₹340 by FY29 to fund spectrum repayments, routine capital expenditure, and operating expenses without continuous reliance on external capital. Even with conservative subscriber stabilization forecasts, internal accruals will fall short unless tariffs increase substantially and consistently.

Tariff Hikes and Funding Prospects

Brokerages had anticipated a tariff hike earlier in the year, but consensus now points to increases in the latter half of 2025. JM Financial analysts noted, "The AGR relief provides breathing room but does not solve the core earnings gap created by spectrum liabilities. ARPU expansion is now essential rather than optional if Vodafone Idea is to meet medium-term cash outflows from internal resources." The relief is expected to bolster the company's long-pending fundraise, a move management has tied to regulatory AGR clarity. Analysts foresee a mix of debt and equity to fuel network investments, though meaningful market share recovery remains doubtful amid sector competition. Banks have indicated openness to further lending discussions following the AGR payment clarity.