Vi targeting tier 3 cities to protect rural customer base: Report

To protect its rural consumers, Vodafone Idea (Vi) has launched 1,100 new shops in tier III markets of 18 states, a report by The Economic Times (ET) said. The telco's rural users are increasingly being targeted by Reliance Jio and Airtel. 

"To enable the large rural population to be a part of the digital revolution, we have taken a renewed approach to our rural retail strategy by introducing the concept of Vi Shops across multiple small towns and tier III markets," Abhijit Kishore, chief operating officer at Vi told ET. 

The shops will offer prepaid products and services to the customers, he added. These have been founded as a three-month-long activity. 

The company has been facing mounting economic pressures. It has to pay $5 billion annually from 2026 as the spectrum and adjusted gross revenue (AGR) charges to the Centre. According to CLSA, it will not be able to meet this requirement.  

Vi is losing customers every month and it has been unable to raise funds. The firm's capex was 80 per cent lower than rival Airtel in the past nine months. The planned conversion of interest into government equity hasn't materialised yet, Business Standard had earlier reported.

"Despite a four-year interest moratorium, Vi's financial crisis is deepening and government conversion to equity is pending. Moreover, we estimate that Vi will be unable to meet around $5 billion in annual payments from FY26 (3.5x current cash flows)," CLSA had said in its report.

In September 2021, the Centre had given telcos a four-year moratorium on payment of AGR and spectrum dues (except for those purchased in 2021).

The companies were also given the option to convert interest on dues into equity to the government. Vi opted to convert Rs 16,000 crore interest into equity for the government. This would give the government a 33 per cent stake in Vi. However, this proposal is pending.