​Vodafone Idea (Vi), India's third-largest telecom operator, is negotiating with banks and global vendors to procure 4G and 5G network equipment using letters of credit (L/Cs) rather than making full upfront payments. This strategy aims to enhance Vi's cash flow flexibility, enabling the company to accelerate its network expansion and 5G rollout plans. ​

Vi has been grappling with substantial financial obligations, including over US$25 billion in net debt as of September 2024. These financial constraints have hindered Vi's ability to invest in network infrastructure, resulting in a lag behind competitors Reliance Jio and Bharti Airtel in 4G coverage and 5G deployment.​

Government interventions and impact

In an effort to support the telecom sector, the Indian government announced in December 2024 a waiver of bank guarantee requirements for spectrum auctions held prior to the 2021 reform package. This waiver, amounting to approximately US$4.32 billion for Vi, was intended to free up financial resources for network expansion and 5G rollout.

Additionally, in April 2025, the government decided to convert some of Vi's spectrum auction dues into equity, increasing its stake in the company to 49 per cent. ​

Negotiations and strategic shift

Despite these interventions, Vi continues to face challenges in securing the necessary funding for its network expansion. The company has been in discussions with banks to raise approximately US$1.2 billion, but banks have exhibited caution, demanding additional collateral for issuing new L/Cs due to Vi's substantial debt and ongoing financial uncertainties. ​

In response, Vi is exploring the use of L/Cs as a payment mechanism for procuring network equipment from vendors like Nokia, Ericsson, and Samsung.

This approach would allow Vi to defer immediate cash payments, thereby improving liquidity and facilitating the timely expansion of its 4G services and the rollout of 5G networks.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.