Vi has already paid Rs 7,854 crore to the Department of Telecommunications (DoT) and has to pay Rs 9,000 crore in March 2022, based on current demands, as the first of 10 annual instalments.
Vodafone Idea (Vi) managing director Ravinder Takkar said the telco expects to raise funds shortly and doesn’t need a Plan B just yet, expressing confidence that adjusted gross revenue (AGR) dues will be reduced.
Low tariffs and the lack of a floor price for them remain the biggest hurdles to improvement in the health of the telecom sector, he said on an earnings call Friday. Vodafone Idea can’t raise tariffs unilaterally, he said.
“I don’t think at this point, a Plan B for funding is needed. We have a plan, we are engaged with investors, we expect this to take place. I don’t think we will reach that point (of Plan B),” he said. The company is “confident that funding will take place in the coming weeks.”
Investors wary about viability of industry
Takkar was referring to the Rs 25,000-crore fundraising plan announced last September which, Vi has said, hasn’t materialised despite six months of talks, with investors wary about the viability of the industry. He played down the importance of high adjusted gross revenue (AGR) dues – about Rs 58,400 crore – that it needs to pay the telecom department in getting funds.
“I would say that while this (AGR dues) is an important element, I do not believe that this is a very big hurdle today in the minds of investors who are engaging with us on fundraising,” Takkar told analysts.
The telco, in a letter to the DoT last week, had said that it expects the total AGR dues sought by the government to be halved.
“These are arithmetic errors and omissions – we are very confident that it is not the intent of the government, DoT, to make us pay for these types of errors,” Takkar said. “So, we are very confident that the Supreme Court will allow the DoT to make adjustments based on those errors and omissions that were done in the first round of calculations of the AGR dues.”
Takkar was referring to the modification plea in the Supreme Court that the telco has filed, highlighting what it said were the DoT’s calculation errors. These included the department not accounting for Vi’s earlier payments and double counting of revenue items as well as deductions not granted on access and roaming charges made by Vi to the other telcos.
“The excess demand upon the applicant which is attributable to these errors amounts to Rs 5,932 crore of principal amount, which would have an overall impact of over four times on the total principal amount aforementioned due to imposition of interest, penalty and interest on penalty,” the telco has said.
On Wednesday, the company posted a loss of Rs 6,985.1 crore for the quarter ended March, wider than the Rs 4,540.8 crore loss in the October-December quarter, hurt by one-time expenses and continuing high depreciation, amortisation and finance costs and subscriber erosion.
Analysts said Vi needs to generate a significant amount of capital and raise tariffs urgently to avoid accelerated market share loss with its capex sharply lagging behind rivalsBharti AirtelNSE 0.45 % and Reliance Jio Infocomm.
Vi had recently written to the DoT that the poor health of the industry is the main reason why investors were unwilling to infuse funds. In its letter, the operator said it needs another year – until April 2023 – to pay its Rs 8,292 crore dues related to spectrum purchased in auctions. It had cited AGR-related payments that were drawing away liquidity as a reason why it needs another year to pay spectrum dues.
On Friday, Takkar said low tariffs and lack of a floor price were the reason it was seeking more time to make the payments. “As has been mentioned many times by myself, as well as several of the industry players, the biggest issue… that is the problem in this sector today is the pricing, the pricing is much lower than it needs to be,” said Takkar.
Rival Bharti Airtel’s chairman Sunil Mittal had on Thursday raised the same point, saying companies should stop “killing each other” and aim to raise tariffs immediately to improve the health of a sector that’s “gasping for breath”.