Investors unwilling to invest in telco untill industry health improves: Voda Idea to DoT – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/telecom/telecom-news/investors-unwilling-to-invest-in-telco-untill-industry-health-improves-voda-idea-to-dot/articleshow/84017742.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23Synopsis

In a letter to the Department of Telecommunications (DoT) dated June 25, the mobile phone company said that due to the adjusted gross revenue (AGR) upfront payment of Rs 7854 crore and the upcoming payment of the first instalment of AGR scheduled for March 2022, it won’t be able to pay its spectrum dues which needs to be paid on April 9, 2022.

Vodafone IdeaNSE -9.05 % has said that investors are not willing to put in money into the cash-strapped telco unless tariffs rise and the health of the industry improves. It added that it needs another year to pay its Rs 8,292 crore dues related to spectrum purchased in auctions as it is not generating adequate cash from operations and adjusted gross revenue (AGR) payments are taking away liquidity.

In a letter to the Department of Telecommunications (DoT) dated June 25, the mobile phone company said that due to the adjusted gross revenue (AGR) upfront payment of Rs 7854 crore and the upcoming payment of the first instalment of AGR scheduled for March 2022, it won’t be able to pay its spectrum dues which needs to be paid on April 9, 2022.

“…we request you to please grant us another year of moratorium to pay this instalment in April, ’23, instead of April, ’22. We are making this request well in advance considering the fact that it is almost inevitable that we will not be able to pay this in Apr, ’22 and DoT will need some time for processing this request internally,” Vodafone Idea said in the letter to telecom secretary Anshu Prakash.

ET has reviewed a copy of the letter. Vodafone Idea had on Wednesday said that it has written to the DoT to allow it one more year to pay its spectrum dues..

The telco has cited a prolonged period of prices remaining below the costs for a situation where it is facing challenges in meeting some of its large payment obligations. It had hoped that a floor pricing regulation would be brought in in April 2020 which would have addressed the current situation of predatory pricing and losses, but that didn’t happen.

“We are working on raising new funding for the last six months but the investors are not willing to invest in the company because they believe that unless there is significant improvement in the consumer tariffs, the health of the industry will not recover and they will incur a loss on their investment,” Vodafone Idea said.

It further said that it has had to pay Rs 7854 crore of cash as upfront payment towards its AGR dues. Additionally, it will have to pay the AGR instalments of about Rs9,000 crore in March, 2022 based on the current demands of DoT. The DoT has demanded around Rs58,400 crore of which the telco has paid Rs7,854 crore.

“We have requested for corrections to be made to those (DoT) demands, and basis those corrections, we expect this amount may reduce to about half. However, even after such a reduction, a liquidity of Rs12,500 crore is take away from our business,” the carrier said.

As a result, the cash being used for payment of AGR dues and “the inability of the operations to generate the required cash in a predatory pricing situation, we find that we will be unable to pay the instalment of Rs8,292 crore due on April 9, 2022. Hence, we request you to please grant us another year of moratorium to pay this instalment in April, ’23, instead of April 22.”

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