Hopeful of govt’s support, Vi chairman 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 ~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 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, a part of its latest annual report.
Throughout the year, the operating environment remained challenging due to unsustainable pricing and hyper competition that was further aggravated by the Covid-19 pandemic, he noted. Kapania said the company will continue to focus on network improvements as it awaits government decisions on industry demands.
Last September, the company’s board announced a ~25,000-crore fundraising plan to meet its debt obligations. The plan was to complete the fund raising by early2021, 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 the UK has 44 per cent stake. Both promoters have decided against infusing any fresh capital in thecompany.
Rating agency ICRA said government support can help the struggling company. An extension of the moratorium on spectrum dues beyond FY22 would result in payment deferral of around ~32,000 crore for the industry, of which ~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 licence fee and spectrum usage charges can also lift the EBITDA. A 1 per cent reduction in levies leads to an annual saving of ~1,600 crore for the industry. This apart, other measures such as reduction in interest rates on DOT dues, elongation of spectrum allotment tenure and introduction of floor tariffs can also aid the industry,” he said.