'Hopeful of govt support': Vodafone Idea chairperson tells shareholders

Vodafone Idea (Vi) is hopeful of government support in generating reasonable returns on its investment and addressing the challenges plaguing the telecom sector, the company’s chairperson Himanshu Kapania said in a letter to shareholders.

Kapania took over from Kumar Mangalam Birla on August 4, days after the Supreme Court rejected its application for a correction in the calculation of adjusted gross revenue dues.

The telecom company’s operational performance has been impacted by intense competition, low tariffs and a debt of Rs 1.9 trillion leaving it with little surplus for network upgrade. The company has sought an additional one year moratorium on spectrum dues and is pitching for a decision on floor price for telecom.

“As the industry continues to remain under unsustainable financial duress, your company is hopeful that the government will provide the necessary support to address all structural issues faced by the sector. Your company with a history of providing 25 years of mobile services to the country is hopeful that the government will support its efforts to generate reasonable returns on their massive investments,” Kapania wrote in the letter, which is a part of company's latest annual report. He added that the company will continue to focus on network improvements as it awaits a government decision.

Last September the company’s board announced a Rs 25,000 crore fundraising plan to meet its debt obligations. While initially the plan was to complete the fund raising by early 2021, the company has been unable to conclude a deal. Potential investors have shied away from committing funds in the absence of increase in telecom tariffs.

In June, Birla offered his stake in Vi to the government of any domestic entity to keep the company afloat. Birla owns 27 per cent stake while Vodafone Group Plc of UK has 44 per cent stake. Both the promoters have also decided against infusing any fresh capital in the company.

Rating agency ICRA said the government support can bring relief to the struggling company. An extension of moratorium on spectrum dues beyond FY 2022 would result in payment deferral of around Rs 32,000 crore for the industry of which Rs 16,000 crore would be Vi’s share, according to Ankit Jain, sector head and assistant vice president, ICRA.

“Reduction in the levies paid by telcos, namely license fee and spectrum usage charges can also lift the EBITDA.  A 1 per cent reduction in levies leads to annual saving of  Rs 1,600 crore for the industry. This apart, other measures like reduction in interest rates on DoT dues, elongation of spectrum allotment tenure and introduction of floor tariffs can also aid the industry,” he said.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel