The irony could not have been starker. On the day Vodafone Idea’s Rs 18,000-crore follow-on public offer was subscribed over six times with strong demand from global institutional investors, the government moved the Supreme Court seeking modification of its 2012 verdict. It wants the court to clarify that spectrum in certain cases can be allotted through an administrative process. As much of the woes of the telecom sector in general and Vodafone Idea in particular has to do with auctions — the adjusted gross revenue (AGR) issue got added later — it seems the wheel has turned full circle. The government’s September 2021 package tried to clear the mess that was created with the apex court’s October 2019 order in the matter of AGR. The apex court concurred with the government’s definition of AGR, thereby leaving the industry to clear dues worth Rs 1.47 trillion. Vodafone Idea’s dues were the highest at around Rs 58,254 crore. Add to this its deferred instalments for spectrum acquired in various auctions, the total dues to the government stand at Rs 1.96 trillion — 98% of its total debt of `2 trillion. Bank debt is a small Rs 4,400 crore.
The recent mop-up of around Rs 20,000 crore — Rs 18,000 crore through the FPO and Rs 2,075 crore from the Aditya Birla Group on a preferential basis — clearly shows that promoters as well as investors have faith in the company. This will certainly help it raise another Rs 25,000 crore via debt. The question, however, is whether Rs 45,000 crore would be enough to take care of its requirements once the current moratorium provided by the government, on payment of AGR and spectrum dues, ends in September 2025. The answer is a clear no, and Vodafone Idea’s CEO Akshaya Moondra was frank enough to admit this in an interview with this newspaper last week.
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The maths is simple: once the moratorium ends in September 2025, the company will need to pay Rs 29,100 crore by the end of March 2026 to the government and Rs 43,000 crore annually from FY27 onwards till FY31. This won’t be possible even in the best-case scenario of tariff hikes and fund infusion. So what’s the way forward? As Moondra told this newspaper, when the time comes, the company will once again urge the government to either provide a further deferral on the payments or convert the dues into equity. It’s up to the government to take a call on the matter as per the 2021 telecom package.
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Then the next logical question is what purpose will the fund raise serve. Moondra is once again clear in stating that it will provide the company the opportunity to participate in industry growth. It also puts at rest all speculation about whether the company can survive or raise funds. Investments in 4G coverage and 5G roll-out will be its priority but the company is sober enough to accept that it’s not in a competitive race with peers Bharti Airtel and Reliance Jio. There’s room for a third private operator and the government has been clear all along that it will do all that is required to ensure that there are three operators in the market. The Telecom Act has cleaned up the regulatory mess. It’s only the legacy burden which continues to weigh on Vodafone Idea. The government should take care of it if the need arises.
The irony could not have been starker. On the day Vodafone Idea’s Rs 18,000-crore follow-on public offer was subscribed over six times with strong demand from global institutional investors, the government moved the Supreme Court seeking modification of its 2012 verdict. It wants the court to clarify that spectrum in certain cases can be allotted through an administrative process. As much of the woes of the telecom sector in general and Vodafone Idea in particular has to do with auctions — the adjusted gross revenue (AGR) issue got added later — it seems the wheel has turned full circle. The government’s September 2021 package tried to clear the mess that was created with the apex court’s October 2019 order in the matter of AGR. The apex court concurred with the government’s definition of AGR, thereby leaving the industry to clear dues worth Rs 1.47 trillion. Vodafone Idea’s dues were the highest at around Rs 58,254 crore. Add to this its deferred instalments for spectrum acquired in various auctions, the total dues to the government stand at Rs 1.96 trillion — 98% of its total debt of `2 trillion. Bank debt is a small Rs 4,400 crore.
The recent mop-up of around Rs 20,000 crore — Rs 18,000 crore through the FPO and Rs 2,075 crore from the Aditya Birla Group on a preferential basis — clearly shows that promoters as well as investors have faith in the company. This will certainly help it raise another Rs 25,000 crore via debt. The question, however, is whether Rs 45,000 crore would be enough to take care of its requirements once the current moratorium provided by the government, on payment of AGR and spectrum dues, ends in September 2025. The answer is a clear no, and Vodafone Idea’s CEO Akshaya Moondra was frank enough to admit this in an interview with this newspaper last week.
The maths is simple: once the moratorium ends in September 2025, the company will need to pay Rs 29,100 crore by the end of March 2026 to the government and Rs 43,000 crore annually from FY27 onwards till FY31. This won’t be possible even in the best-case scenario of tariff hikes and fund infusion. So what’s the way forward? As Moondra told this newspaper, when the time comes, the company will once again urge the government to either provide a further deferral on the payments or convert the dues into equity. It’s up to the government to take a call on the matter as per the 2021 telecom package.
Then the next logical question is what purpose will the fund raise serve. Moondra is once again clear in stating that it will provide the company the opportunity to participate in industry growth. It also puts at rest all speculation about whether the company can survive or raise funds. Investments in 4G coverage and 5G roll-out will be its priority but the company is sober enough to accept that it’s not in a competitive race with peers Bharti Airtel and Reliance Jio. There’s room for a third private operator and the government has been clear all along that it will do all that is required to ensure that there are three operators in the market. The Telecom Act has cleaned up the regulatory mess. It’s only the legacy burden which continues to weigh on Vodafone Idea. The government should take care of it if the need arises.
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The burden of legacy
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24.04.2024
The irony could not have been starker. On the day Vodafone Idea’s Rs 18,000-crore follow-on public offer was subscribed over six times with strong demand from global institutional investors, the government moved the Supreme Court seeking modification of its 2012 verdict. It wants the court to clarify that spectrum in certain cases can be allotted through an administrative process. As much of the woes of the telecom sector in general and Vodafone Idea in particular has to do with auctions — the adjusted gross revenue (AGR) issue got added later — it seems the wheel has turned full circle. The government’s September 2021 package tried to clear the mess that was created with the apex court’s October 2019 order in the matter of AGR. The apex court concurred with the government’s definition of AGR, thereby leaving the industry to clear dues worth Rs 1.47 trillion. Vodafone Idea’s dues were the highest at around Rs 58,254 crore. Add to this its deferred instalments for spectrum acquired in various auctions, the total dues to the government stand at Rs 1.96 trillion — 98% of its total debt of `2 trillion. Bank debt is a small Rs 4,400 crore.
The recent mop-up of around Rs 20,000 crore — Rs 18,000 crore through the FPO and Rs 2,075 crore from the Aditya Birla Group on a preferential basis — clearly shows that promoters as well as investors have faith in the company. This will certainly help it raise another Rs 25,000 crore via debt. The question, however, is whether Rs 45,000 crore would be enough to take care of its requirements once the current moratorium provided by the government, on payment of AGR and spectrum dues, ends in September 2025. The answer is a clear no, and Vodafone Idea’s CEO Akshaya Moondra was frank enough to admit this in an interview with this newspaper last week.
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