Vodafone Idea had a total gross debt of 1.91 lakh crore, excluding rental debt and accrued but unmatured interest, as of June 30, 2021
The government has made it possible for telecoms operators to repay interest on contributions through equity and also has indicated that it has no interest in acquiring a telecom company, a senior Vodafone Idea official said. , riddled with debt.
Vodafone Idea Ltd (VIL) Managing Director and CEO Ravinder Takkar said in an interview with PTI that it is clear that the government wants the company to be competitive in the market and that there should be at least three private service providers in the telecommunications sector.
âI had many interactions with various parts of government prior to this announcement (telecommunications reforms). In all of my conversations it is absolutely clear that the government has no interest in owning, acquiring or managing any other telecommunications company. “, says Mr. Takkar.
The government is already running loss-making telecommunications companies BSNL and MTNL, which have yet to make a profit after an aid package of around 69,000 crore awarded to them in October 2019. Some experts have claimed that the government could end up owning a “significant” part. (estimates vary from 26% to controlling stake) in VIL at the end of the moratorium period, if the telephone company chooses to pay accrued interest or annual installments in the form of equity.
“They (the government) have made it clear that they want three private players to stay. They want us to be competitive in the market. They want us to operate competitively,” Takkar said.
VIL had a total gross debt of 1.91 lakh crore, excluding lease debt and accrued but unmatured interest, as of June 30, 2021. Debt includes spectrum deferred payment obligations of 1.06 lakh crore and an AGR liability of 62,180 crore which is due to government and bank and financial institution debt of 23,400 crore.
The company had posted a consolidated turnover of 9,152.3 crore during the period April-June and the financial cost was 5,228.4 crore.
According to Jefferies, the 4-year moratorium on payments will provide liquidity relief for VIL and “could lead the government to take a significant stake in VIL.” The investment banking group’s analyst report predicted that the government could own 26% of VIL at the end of a four-year period, if the phone company chooses to pay the cumulative interest of 9,000 crore per through equity.
Mr. Takkar said that, from a business perspective, the exercise of a stock option for the payment of interest is the least area that has been its focus and VIL is committed to managing the business.
âOur intention is to reimburse the government and our business plan will reflect that part. But having this option where it could be converted into equity is a bold move and somehow ensures that if the industry is not fixed, the government will continue to support the industry for longer, as long as it takes, âsaid Takkar.
Credit Suisse said the moratorium would ease immediate cash constraints for VIL, but it will also need to raise around 7,300 crore over the next six to nine months to pay off its off-spectrum debt and get through those four years with minimal investment.
He said that despite the moratorium and conversion of interest into shares during the period, VIL will need an ARPU (Average Income Per User) of 240 yen by FY 2026 to cover 33,000 crore in payments. annual spectrum and AGR contributions which must be reimbursed over the remaining term.
Mr Takkar said the company will update its business plans after the government releases guidance on various measures announced as part of the telecommunications reforms and may seek approval from the board of directors to raise funds. in order to close the gap necessary to achieve business goals.
He said the government’s reform measures have given the industry confidence that tariffs can be increased.
âIn my opinion, pricing is one of the main reasons the industry has reached this level. With this government program, prices in the industry can certainly improve. We have reached a point where three players are present in the industry, âhe said.
Bharti Airtel and VIL have advocated for an increase in the tariffs for mobile services in order to reduce financial charges.
Mr Takkar said there are three private players left in the market and everyone wants prices to go up.
âWe don’t know what the other player’s intention will be. This lack of trust has led to a point where no one wants to take a stand unilaterally. In this environment, with the government package now, that (trust deficit) goes away which means, without any government intervention, the industry can handle the price increases, which I think it will. I certainly see it happening in a short period of time. It will be gradual, but it will. will begin to take place, âsaid Mr. Takkar.
VIL had reported an average revenue per user (ARPU) of 104 in the first quarter ended June 30, 2021 while its competitors Bharti Airtel and Jio had recorded an ARPU of 146 and 138.4.