Vodafone Idea gets a boost from DoT relief; Citi sees significant upside

Vodafone Idea (Vi) received a major lifeline as the Department of Telecommunications (DoT) waived the requirement for bank guarantees for spectrum auctions held prior to the telecom reform package. The waiver, announced on December 30, eliminates the need for guarantees totalling approximately Rs 24,800 crore for each spectrum instalment. This development is expected to accelerate Vi's investments in 4G and 5G networks.

In a BSE filing, Vodafone Idea stated that this reform significantly eases its financial burden and removes a major obstacle in raising much-needed debt funding. The waiver comes as a timely relief for the cash-strapped telecom operator, which has been struggling to stabilize operations amid mounting debt.

Citi Research sees 68 per cent upside for Vodafone Idea
Citi Research has maintained a bullish stance on Vodafone Idea, reiterating its 'buy' rating with a target price of Rs 13 per share. This represents an impressive 68 per cent upside from the previous session’s closing price. The brokerage noted that the waiver not only bolsters Vi’s financial position but also improves its prospects for securing funding, a critical factor for the company’s future.

Positive impact on Indus Towers
The relief measure has also positively impacted Indus Towers, a key partner of Vodafone Idea. Citi Research reaffirmed its 90-day positive catalyst watch on Indus Towers, setting a target price of Rs 485 per share. The brokerage highlighted the potential for dividend reinstatement in Q3 or Q4 of FY25, thanks to improved free cash flow supported by declining capital expenditure.

Additionally, Citi expects a pickup in tenancies from Vodafone Idea in Q3, which could lead to an inflection in tenancy ratios starting Q4.

Outlook: A long road ahead
While the bank guarantee waiver is a critical step forward, market experts caution that Vodafone Idea still faces challenges, including intense competition and operational inefficiencies. Progress on debt funding will remain a key factor for both Vi and Indus Towers in the near term.

This development marks a pivotal moment for the beleaguered telecom operator, bringing renewed hope for growth and financial stability.