As the government prepares a relief package for the debt-ridden telecom sector, the government wants promoters of the beleaguered Vodafone Idea NSE 12.17 % — Vodafone Group Plc of the United Kingdom and Aditya Birla Group (ABG) — to show their commitment to the India telecom operations by infusing equity.
Officials said the Department of Telecommunications (DoT) is considering contacting Vodafone Idea to learn more about its plans and the promoters' long-term commitment to the loss-making telco, as the government does not want to find itself in a situation where it announces a package but the company fails.
A senior government official told ET, The administration is going all out to keep a three-player market. However, it is critical for the two promoters to inject funds into the company and explain their long-term vision and strategy.
Vodafone Idea's net loss for the first quarter increased to ₹7,319 crores on Saturday, up from ₹6,985.1 crores in the previous quarter. The company has sent an SOS to the government for help.
Its debt has risen to Rs.1.92 lakh crore, with cash and cash equivalents at Rs.920 crore, highlighting the company's dire financial situation and fight for survival.
In 11 months, Vodafone Idea has not been able to raise the 25,000 crores it had hoped to raise. In the next 12 months, the cash-strapped telco stated it needed to pay the next instalment of adjusted gross revenue (AGR) liabilities of roughly 9,000 crores, as well as a debt payment of 16,385 crores. Kumar Mangalam Birla, head of the Aditya Birla Group, stood down as Vodafone Idea's non-executive chairman earlier this month.
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Analysts estimate that Vodafone Idea requires at least Rs 70,000 crore in equity capital and government assistance to survive.
Telecom Watchdog urges the government to reject Vi's request to delay payments.
Hesitant promoter:
Kumar Mangalam Birla issued the government a distress letter, offering to hand over ABG's 27.66 per cent holding to any government institution that could assure the company's existence.
However, both promoters have stated that they will not be injecting new equity into the JV, which has raised concerns among government officials.
Vodafone Idea managing director Ravinder Takkar said both promoters are committed to providing support and direction to the telecom in line with both parties' declared positions during an earnings call on Monday.
The government, on the other hand, is pressing for concrete evidence of promoters' support for the struggling carrier. What if the company fails despite the government's assistance and efforts? Only government help, according to our calculations, will be insufficient. They'll require a lot of money, and it could not work out unless the promoters commit, the official said.
Analysts predict the telco will need $3.5-5 billion to pay its statutory dues, meet debt payback commitments, and invest in expanding and deepening its 4G network to stop the flow of subscriber losses that are dragging on revenue, according to ET's August 16 edition. Vodafone Idea lost almost 12 million users between April and June to rivals Reliance Jio and Bharti Airtel NSE -0.54 per cent, both of whom added users.
The government is considering phasing out bank guarantees, drastically reducing licence fees and spectrum usage charges, allowing the return of unused airwaves to the government and redefining AGR prospectively to exclude all non-telecom items, among other previously announced measures.
(Source: Economic Times)
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