Vodafone Idea had a total gross debt of ₹1.91 lakh crore as on June 30, 2021, excluding lease liabilities and including interest accrued but not outstanding.
A top executive of debt-ridden Vodafone Idea has said that the government has given telecom companies an option to pay the outstanding interest through equity and also stated that it is not interested in taking over any telecom company.
Vodafone Idea Limited (VIL) Managing Director and CEO Ravinder Takkar said in an interview to PTI that it is clear that the government wants the company to compete in the market and have at least three private service providers in the telecom sector.
“Till this announcement (telecom reforms) I have had many conversations with different parts of the government. In all my conversations, it is quite clear that the government is not interested in owning or acquiring or running any other telecom company.” Mr Takkar said.
The government is already managing loss-making telcos BSNL and MTNL, which are yet to post profit after a relief package of around ₹69,000 crore in October 2019. Some experts argued that the government may have a “larger” share. (Estimated 26% for majority stake) in VIL at the end of the moratorium period, if the telco chooses to pay cumulative interest or annual installments by way of equity.
“They (the government) have made it very clear that they want the three private players to remain. They want us to compete in the market. They want us to operate in a competitive manner,” Mr. Takkar said.
VIL’s total gross debt stood at ₹1.91 lakh crore, excluding lease liabilities and including interest, but not payable, as of June 30, 2021. The loan includes deferred spectrum payment obligation of ₹1.06 lakh crore and AGR liability of ₹62,180 crore on account of debt of ₹23,400 crore from the government and banks and financial institutions.
The company posted consolidated revenue of ₹9,152.3 crore and finance cost of ₹5,228.4 crore during the April-June period.
According to Jefferies, the 4-year moratorium on payments will offer VIL cashflow relief and “could allow the government to take a larger stake in VIL”. The investment banking group analyst report had estimated that the government may take 26% of VIL at the end of the four-year period, if the telco chooses to pay cumulative interest of ₹9,000 crore through equity.
Mr. Takkar said that from the company’s point of view, exercising equity option for interest payment is the least area on which it is focused and VIL is committed to running the company.
“Our intention is to pay back the government and our business plan will reflect that part. But certainly having the option where it can be converted into equity is a bold move and in a way it ensures that If the industry is not fixed then the government will continue to support the industry for as long as it is needed,” Mr Takkar said.
Credit Suisse has said that the moratorium will ease immediate cash flow constraints for VIL, but it will have to pay off its non-spectrum debt and ride out these four years with minimum capex of around ₹7,300 in the next six to nine months. Crores would need to be raised.
It added that notwithstanding the moratorium of interest and equity conversion during the period, VIL will require an ARPU (average revenue per user) of ₹240 by FY 2026, to meet annual spectrum payments and ₹33,000 crore of AGR dues. To be. Paid for the rest of the term.
Mr Takkar said the company will update business plans after the government issues guidelines on various measures announced as part of telecom reforms and the board to raise funds to bridge the gap needed to meet business goals. can get approval.
He said that the reform measures of the government have given confidence to the industry that the tariff can be increased.
He said, “Pricing in my view is one of the big reasons why the industry has reached this stage. With this government package there can definitely be an improvement in pricing in the industry. We have reached a point where in the industry. There are three players.”
Bharti Airtel and VIL have been advocating for an increase in the rates of mobile services to reduce the financial burden.
Mr Takkar said there are three private players left in the market and everyone wants the prices to go up.
“We are not sure what the intention of the other player is going to be. This lack of trust led to a point where no one wants to take a one-sided position. In that environment, with the government package, that (lack of confidence) goes away which means, without any intervention from the government, the industry can manage the price rise which I think it will be. I am definitely seeing it in a short period of time. It will happen gradually but It will start to happen,” said Mr. Takkar.
VIL reported Average Revenue Per User (ARPU) of ₹104 for the first quarter ended June 30, 2021, while its competitors Bharti Airtel and Jio reported ARPU of ₹146 and ₹138.4.
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