Rating agency ICRA warned in a note on Monday that Vodafone Idea’s financial troubles have cascading ramifications for the telecom industry, with the distressed operator shutting down operations if the mobile tower sector faces the prospect of substantial tenancy losses. is forced to.
“Vodafone Idea Limited (VIL) is under financial stress, as reflected by mounting losses and rising debt levels, which are likely to impact its financial lenders as well as the government, besides its employees, its customers. and allied industries are impacted, most prominently towers,” ICRA said. It added that in case of exit from VIL, the tower industry could see the possibility of about 1,80,000 tenancy vacant. Of these, only 40-50% are expected to be received by tower companies as alternative tenancy over a period of 18-24 months, the agency said.
There are around 5.5 lakh towers in the country and each tower can have multiple tenancy.
Emphasizing that government support was ‘important’, ICRA said that in view of the current situation and large near term obligations for VIL, physical external support (mainly from the government) may act as a relief measure. can.
The most effective relief would be the extension of the moratorium on spectrum dues beyond FY 2022 as it could result in payment of ₹32,000 crore dues to the industry in FY2023, of which ₹16,000 crore will be VIL’s share, noted Jain, Sector Head and Assistant Vice President, ICRA.
“Reduction in charges paid by telecom companies, i.e. license fee and spectrum usage charges can also lift EBITDA,” Mr. Jain said. “Reduction in levy by 1% results in annual savings of ₹1,600 crore for the industry. Apart from this, other measures like reduction in interest rates on DoT dues, increase in spectrum allocation period and introduction of floor tariff can also help the industry,” he said, adding that ICRA estimates translate to ₹1 increase in ARPU. ₹450 crore EBITDA accretion for the industry.
As on June 30, 2021, VIL owes lenders around ₹23,400 crore and the government ₹1,68,190 crore for spectrum and AGR deferred dues.
According to ICRA, VIL has 35% tenancy share and 36% revenue share. In the event of VIL shutting down operations, the tower companies will face these tenancy losses, which will translate into a fall in revenue and EBITDA for the industry.
It added that apart from the loss of tenancy, tower companies will also have to bear the brunt of write-offs for VIL’s receivables, which have been witnessing steady growth in the recent past.
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