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India’s Vodafone Idea is scouting for funds amid losses and a dwindling subscriber base, and questions are also being raised about its ability to remain a going concern.
The troubled mobile phone service provider had recently approached the telecom department seeking an extension of the two-year moratorium on paying spectrum fees by one more year.
The two-year moratorium was given to all telecom operators for FY21 and FY22. Telecom officials feel a moratorium cannot be for one company and has to be for the entire sector. As this decision has revenue implications, approval by the finance ministry will be needed.
Vodafone Idea had said it was unable to generate enough cash, as it has also had a payment obligation towards adjusted gross revenue tax to be paid to the telecom department, as mandated by the Supreme Court in 2019.
The top court had widened the scope of adjusted gross revenue to include income from non-core items. This had affected legacy companies such as Vodafone Idea and Bharti Airtel.
The company is required to pay 584 billion rupees (US$ 7.83 billion), while it has so far paid 78.54 billion rupees ($1.06 billion).
The court ruled last September that the telecom operators must pay 10% of the total dues as demanded by the telecom department by March 31, 2021, and the remainder in equal installments every financial year up to March 31, 2031.
Vodafone Idea, along with Bharti Airtel and Tata Teleservices, has filed pleas in the Supreme Court seeking recalculation of the adjusted gross revenue dues.
Vodafone Idea had approached the top court to modify or clarify its order to allow the government to consider its submissions on the calculation errors and rectify them accordingly.
The case may come up for hearing on Monday.
Weak numbers
Vodafone Idea had posted a loss of 70.23 billion rupees during the January-March quarter, the loss having widened significantly compared with 45.40 billion rupees in the preceding quarter. The company’s revenues declined sharply by nearly 12% on a quarter-on-quarter basis to 96.08 billion rupees.
The company’s average revenue per user during the quarter declined to 107 rupees compared with 121 rupees in the preceding quarter. Minutes of voice usage also declined to 657 minutes against 673 in the preceding quarter.
According to the Telecom Regulatory Authority of India, Vodafone Idea lost over 1.8 million users in April and its subscriber base has dwindled to 280 million. Market leader Reliance Jio has added 4.75 million users during the month and has a subscriber base of 427.6 million, while Bharti Airtel added 517,000 users to take its subscriber base to 352.9 million.
Fundraising
Vodafone Idea has said in a regulatory filing that it is exploring various opportunities and options to raise funds within the authorizations given by its board. Economic Times newspaper earlier reported that the company had initiated talks with US private equity group Apollo Global Management to secure up to $3 billion in funding over the next three months through a mix of debt and equity.
The cash-strapped company is also looking to sell its fixed-line broadband subsidiary, optical fiber unit, and data centers business to raise around $1 billion in order to meet its liabilities. The company also plans to sell the land bought to set up data centers.
After Vodafone-Idea reported a loss in the January-March quarter, a consortium of lenders sought the finance ministry’s intervention to provide some relief to the telecom company, as concerns were being raised about its survival. Experts also point out that if Vodafone Idea shuts down, thousands of jobs will be lost.
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