NOT FOR PROFIT Ringing in a new tone

The webcast Monday morning on Vodafone Idea’s rebranding followed by an interaction with the top management seemed surreal. The script that industry watchers and analysts had written in the recent past about the telco was being shred to pieces, softly. The narrative till now was of an uncertain future for the joint venture between the Newbury-headquartered telecom major and Aditya Birla Group. The body language at the Zoom roundtable with select media was one of confidence around a shared future that could stretch to many years or even forever, as chief executive Ravinder Takkar spelt out during the virtual meet. The stock market acknowledged the shift in a rather by-the-way manner: 2.9 per cent increase on NSE.

So, what really has changed for Vodafone Idea, saddled with losses and piling debt, prompting it to bravely showcase its integration in a tough telecom market? Was the countdown all a mistake? And, does that mean India is nowhere close to a duopoly that experts have been debating on? Let’s rewind a bit.

It was November 12, 2019, and Vodafone group chief executive Nick Read was still trying to process the latest blow from India — the Supreme Court verdict of October 24, 2019, mandating telcos to pay adjusted gross revenue (AGR) dues of as much as ~1.47 trillion. Vodafone Idea’s share in that worked out to more than ~50,000 crore, of which the UK partner would need to shell out around ~28,000 crore.

In that setting, Mr Read said at a media roundtable in London: “If you don’t get the remedies being suggested, the situation is critical.” He added: “If you’re not a going concern, you’re moving into a liquidation scenario — can’t get any clearer than that.” Vodafone, which owns around 45 per cent in the Indian telecom venture, was asking for at least a two-year delay on spectrum payments, besides lower licence fees and taxes. It also sought staggered instalments of AGR dues, preferably 15 years.

The government was of course upset with the outpourings from one of the celebrated multinationals in the country, especially as the court order on massive AGR outgo was the result of a prolonged dispute between the government and the industry. And finally, the Supreme Court had upheld the Department of Telecommunications’ (DOT) definition of AGR. Apologies and regrets from the UK firm followed as Read cited “out of context” interpretation by the media.

Cut to September 7, 2020. Ten months after Mr Read’s statement, there was no mention of liquidation or bankruptcy or even its huge losses during the rare roundtable where the CEO took questions. In fact, in a video clip during the conference, Mr Read spoke of Voda Idea being the new champion for the government’s vision for Digital India. Hiking tariffs was spoken about loudly and clearly as a way to make the telecom industry sustainable. Vodafone Idea has never been shy of raising tariffs and it won’t be even now, the audience was told. While that was on expected lines, what came as a surprise was the company’s latest stand on the AGR verdict allowing the industry to make payments over a period of 10 years after the initial upfront money. Mr Takkar didn’t hedge his words while saying he was thankful for being given 10 years to make the payment. Didn’t analysts say just last week that the AGR verdict on the duration of payment was negative for the telco?

Mr Takkar provided the answer himself Monday morning. “We have already paid the upfront money. And our 10-year instalments begin in March 2022. In other words, Vodafone Idea has got what it had asked for. The telco had insisted on at least a two-year delay in AGR payment in 2019, and March 2022 is more than two years apart. Surely, it would have loved to get the option of a 15-year staggered payment, but it can certainly make do with 10 years. The CEO, who has handled several international businesses before this, would know that well and should be armed with ways to handle such a situation.

However, March 17 may have been a significant date in the Voda Idea calendar, pushing it to carve a new innings despite the odds. That day, the Union government or DOT placed on record its view on the duration of the staggered payment — straight 20 years. The top officials of the telco have been making rounds of the government on a long list of thorny issues ranging from retrospective tax to AGR dues for years, with indifferent outcomes mostly. Dot’s 20-year AGR payment call did not go unnoticed. To a question Monday morning on whether 10 years were sufficient to pay off the dues, the company remembered to mention the government’s rather generous staggered term. But, 10 years will be useful while the telco goes for a ~25,000-crore fund-raising round as well as a tariff hike to not just keep itself as a going concern but make the business robust in what is seen as a promising market still.