New Delhi: The government wants promoters of the beleaguered Vodafone Idea — Vodafone Group Plc of the UK and Aditya Birla Group (ABG) — to show their commitment to the India telecom operations by infusing equity, as the government prepares a relief package for the debt-laden sector.
Officials said the Department of Telecommunications (DoT) is, in fact, considering reaching out to Vodafone Idea to understand its plans and the promoters’ long-term commitment towards the loss-making telco, as the government doesn’t want a situation where it announces a package and the company still goes under.
“The government is going all out to retain a three-player market,” a senior government official told ET. “But it is important for the two promoters to infuse capital into the company and explain their vision/strategy for the next few years.”
Vodafone Idea, which put out an SOS to the government for relief, on Saturday saw its net loss for the first quarter widen to Rs 7,319 crore, from Rs 6,985.1 crore in the preceding quarter. Its debt increased to Rs 1.92 lakh crore, with cash and cash equivalents at Rs 920 crore, underlining its extreme financial distress and its fight for survival.Vodafone Idea hasn’t been able to raise its planned Rs 25,000 crore in 11 months. The cash-strapped telco said it needs to pay the next instalment of adjusted gross revenue (AGR) liabilities of around Rs 9,000 crore and debt payment amounting to Rs 16,385 crore in the next 12 months.
Earlier this month, Aditya Birla Group chairman Kumar Mangalam Birla stepped down as Vodafone Idea’s non-executive chairman.
Promoters reluctant
He wrote a distress letter to the government, offering to hand over ABG’s 27.66% stake to any government entity that can ensure the company’s survival.
However, both promoters have, so far, reiterated that they won’t be infusing fresh equity in the JV, raising concerns in government circles.
At an earnings call on Monday, Vodafone Idea managing director Ravinder Takkar said both promoters are “committed to provide support and guidance” to the telco “in line with the stated positions of both groups.”
But the government is pushing for tangible evidence of promoters’ support to the beleaguered carrier. “What if, despite the government’s support and efforts, the company goes under? Our calculations show only relief from the government will not be sufficient. They will need huge capital injections and until the promoters commit, it might not work out,” the official said.ET reported in its August 16 edition that analysts estimate the telco would need $3.5-5 billion to pay its statutory dues, meet debt repayment obligations and invest in expanding and deepening its 4G network to stem the flow of subscriber losses, which are dragging on revenue. In April-June alone, Vodafone Idea lost over 12 million users to rivals Reliance Jio and Bharti Airtel, both of whom added users.
Among the previously reported measures under consideration by the government are phasing out of bank guarantees, drastic reduction in licence fees and spectrum usage charges, permitting surrendering of unused airwaves to the government and redefining AGR prospectively to exclude all non-telecom items.
Government expects Vodafone Idea promoters to infuse capital - ETTelecom.com
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