Vodafone Idea secures $3.5 billion loan approval but faces massive dealer bill

Vodafone Idea has secured a crucial lifeline in its battle for survival, with a consortium of lenders led by the State Bank of India reportedly approving a massive $3.5 billion loan. The funding comes at a critical moment for India's third-largest telecom operator, which has been burning cash at an unsustainable rate just to keep its customers from fleeing to rivals.

The sheer scale of that struggle is laid bare in a new report by global brokerage Jefferies, which initiated coverage on the company with a "Buy" rating but highlighted the eye-watering cost of its survival strategy.

Paying double to keep customers

To defend its dwindling market share against Bharti Airtel and Reliance Jio, Vodafone Idea has been forced to lavish money on the dealers who sign up new users. In the financial year ending 2026, the company spent 8.2% of its sales revenue on dealer commissions. That is roughly twice the rate spent by Airtel.

This premium is even more striking on an individual basis: Vodafone Idea pays 28% more in dealer commissions for every single customer it adds compared to Airtel. It is an expensive sticking plaster for a network that has lagged far behind its competitors.

These customer acquisition costs have climbed steadily. In FY22, dealer commissions accounted for just 3.5% of sales. That figure jumped to 6.7% in FY23 and peaked at 8.4% in FY24, before settling at 8.2% in FY26. Consequently, the company’s total selling and marketing expenses have swollen from 7.7% of sales in FY22 to 10.5% in FY26.

The cash crunch is delayed, not solved

The reported $3.5 billion bank loan will go a long way toward plugging this gap. Jefferies estimates that a debt raise of Rs 25,000 crore (around $3 billion) will be enough to tide Vodafone Idea over from FY27 to FY29.

Most of this money will be pumped straight into its infrastructure. The company plans to expand its network by 30%, building up to 262,000 sites by FY29. If successful, this rollout should narrow the coverage gap with its rivals, allowing the company to scale back its expensive dealer commissions to an estimated 6.5% of sales.

But the breathing room will be short-lived.

Jefferies warns that Vodafone Idea’s annual cash outflows are set to balloon to more than Rs 40,000 crore between FY29 and FY34. To survive that period, the brokerage calculates that the telco will need to raise another Rs 16,000 crore in fresh equity by FY30.

Doing so would also trigger a deal with the Indian government, converting spectrum liabilities worth Rs 15,300 crore into state-held equity.

Why analysts are still betting on a comeback

Despite these looming hurdles, Jefferies remains bullish, setting a target price of Rs 20 per share—a 29% upside from current levels.

The logic is simple: Vodafone Idea is highly leveraged, meaning any positive change in the market will have a massive multiplier effect on its value. The brokerage estimates that every 10% increase in mobile tariffs across India will translate into a 34% jump in the company’s equity value.

If subscriber numbers finally stabilise by FY28, Jefferies expects operating leverage to kick in, driving a 25% compound annual growth rate in cash EBITDA between FY26 and FY31. For investors willing to stomach the high risk, the rewards of a turnaround could be substantial—but only if Vodafone Idea can keep finding billions of dollars to pay for it.