What is future of vodafone idea
In addition, the telco has requested deferment of the AGR payment schedule. Vodafone Idea is also batting for reducing license fee from existing 8 per cent to 3 per cent, and spectrum usage charges SUC from about 3 per cent currently to 1 per cent. As the highest decision-making authority in the Telecom Ministry, DCC members are likely to discuss relief measures for telcos such as giving soft loans to them to pay up their AGR dues, and easier payment terms on components like interest, penalty, and interest on penalty, which together constitute nearly 74 per cent of the overall AGR dues. A soft loan is essentially a loan given on lenient terms as compared to the usual loans available in the market.
Pushed to the brink, what next? Vodafone Idea’s options dwindle
There is a broad consensus that the telecom company will not be allowed to fail. What lifelines are in the works? This feverish pace of events is not surprising as the company is fighting a desperate battle for survival.
Vodafone Idea finds itself in this unenviable position after losing a year legal battle in the Supreme Court in October last year against the department of telecommunications DoT over the definition of adjusted gross revenue AGR and regulatory payments linked to it.
On 14 February, the Supreme Court rejected applications by telecom firms including Bharti Airtel Ltd and Tata Teleservices Ltd to defer paying these tax levies to the government.
Given the situation, the government has a big problem on its hands. It could also potentially lead to a duopoly of service providers with state-owned Bharat Sanchar Nigam Ltd as a distant third market participant , which in turn can lead to higher mobile tariffs and stoke inflation.
Supreme Court compliance, keeping the health of the telecom sector intact and consumer interest," said a top government official, requesting anonymity.
Despite the call for urgent relief from the sector, the Digital Communications Commission, the highest decision-making authority at DoT, is yet to make a final decision, which once passed by the commission, would also need to be approved by the cabinet.
At this stage, there is a broad consensus within the government that Vodafone Idea will not be allowed to fail. Clearly, there is yet to be a consensus on how exactly Vodafone Idea will be saved. Given these factors, what kind of package will the government serve up? And will the deal have implications for consumers and the competition? Last week, DoT asked all operators to speed up their self-assessment of AGR dues and submit documents backing their calculation even after Bharti Airtel, Tata Teleservices and Vodafone Idea made partial payments.
The government is exploring the possibility of roping in third-party audit firms to reconcile dues payable by the telecom operators after differences emerged in individual calculations made by the government and the telcos, which was reported by Mint on 21 February.
Bailout options on the table include setting up a fund that will lend money to telcos at a concessional rate to repay their dues. Another option is of a revised payment plan, which will enable companies to defer payment of penalties and interests. However, there is also growing criticism that the government has whiled away far too much time, before finally waking up to the gravity of the task at hand.
They were aware of the stress on companies which have been posting losses before the verdict also. They know that tariffs are very competitive. Too much time has been wasted since October till now," said a former DoT official, requesting anonymity. Vodafone Idea has also come in for criticism.
It was already amply clear to everyone that Reliance Jio had already pulled off a coup in the hypercompetitive telecom market by securing government approval to provide voice telephony with its technologically superior 4G fourth-generation data service via a pan-India licence.
According to someone present at the meeting that day, the agenda was to ensure that nothing was left to chance. The message was clear: Jio would go on an all-out price war to gain market share at any cost. Jio is now the largest telecom company in both revenue and market share. Ebitda stands for earnings before interest, tax, depreciation and amortization. But as analysts at Kotak Institutional Equities pointed out in a note to clients last year, Vodafone Idea should take a fair share of the blame for its decline as well.
While the self-assessment principle may help to some extent, another hope is that the Supreme Court may still be open to modification of payment terms as proposed by the government. Whatever shape the bailout takes, Vodafone Idea still needs a massive fund infusion.
Its network remains far inferior compared to Jio and Bharti Airtel, and given its cash constraints, investments in network enhancement have been minimal. Despite the tariff hikes in December , the cash flow situation remains poor and an equity fund infusion will be critical to arrest market share decline, say analysts.
In November , Vodafone Idea reported a decline of 36 million in its subscriber base. As the churn in recent months shows, this cannot be taken for granted. Since the merger in the second quarter of , Vodafone Idea has lost 6. During the same period, Jio gained 9. Circle A has the highest population base and commands the maximum Arpu across circles consisting of states with large cities like Maharashtra, Gujarat, Andhra Pradesh, Karnataka and Tamil Nadu.
In December last year, in a massive relief to Vodafone Idea, both Bharti Airtel and Reliance Jio raised prices of their prepaid voice and data services. They ended a protracted tariff war that had dragged rates to the lowest in the world. According to people close to the deliberations, this was thanks to the nudging by top echelons in the government. If the government even partially agrees to this proposal, it would result in a huge accretion to profits and cash flows.
Any further hike in tariffs would be unpopular with consumers and the move could also face scrutiny from the Competition Commission of India.
However, given the dire straits the industry is in, the government is clearly more open to such suggestions now than earlier. Sharma had worked in different positions within Vodafone Group for many years, and was called from the Czech Republic to India in April as chief operating officer to make sure that he became familiar with the Indian business before steering the combined entity.
Notably, both Aditya Birla Group and Vodafone Group have for now, at least ruled out any fresh equity infusion in the company. Given the current mess, those plans look unlikely. Of course, this is not the first time the telecom industry has witnessed dramatic roadblocks. From the run-up to the National Telecom Policy in the s, to the fixed line telephony controversy of and finally the 2G scam at the end of the last decade, the sector has survived it all. Click here to read the Mint ePaper Livemint.
Join Livemint channel in your Telegram and stay updated. You are now subscribed to our newsletters. On the table Last week, DoT asked all operators to speed up their self-assessment of AGR dues and submit documents backing their calculation even after Bharti Airtel, Tata Teleservices and Vodafone Idea made partial payments. The challenges ahead Whatever shape the bailout takes, Vodafone Idea still needs a massive fund infusion.
Romita Majumdar contributed to this story. Internet Not Available. Wait for it… Log in to our website to save your bookmarks. It'll just take a moment. Yes, Continue. Your session has expired, please login again.
Vodafone Idea's latest proposal to the government is for a floor price to be own revenues and set a precedent for future spectrum payments. “Even if Vodafone Idea pays the principal amount for AGR dues to comply partially with the SC order, the current cash and equivalent and future.
The Supreme Court on October 24, , ruled that statutory dues need to be calculated by including non-telecom revenues in AGR of telcos, leading to huge liabilities of Rs 1. Vodafone Idea Ltd VIL , whose liability is estimated to be around Rs 53, crore including Rs 24, crore of spectrum dues and Rs 28, crore in licence fee, has already warned of shutdown if no relief is given. In this matter, Bharti Airtel's liabilities as per last available estimates added up to nearly Rs 35, crore, including licence fee and spectrum usage charge dues, Tata Teleservices around Rs 10, crore, Telenor which sold spectrum to Airtel Rs 1, crore.
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Three Bench Judge Panel, headed by Justice Arun Mishra was extremely angry at the Telecom companies for defying the orders to pay dues before the 24th January deadline. Both Telecom companies were seeking relief from the apex court in terms of waiver of interest or increase in the payment period. But instead, they got thrashing from the court for not obeying the previous judgment where the court has ordered them to pay the dues.
Vodafone Idea is on the verge of a crisis: What went wrong with the telecom major?
The stock still trades at a fraction of the year-ago levels. On its part, the government has requested the Supreme Court to let the telecom companies pay interest and penalty related to their AGR liabilities over a period of two decades. If the Supreme Court agrees, taking the view that telcos are showing the intent to pay, it will be a huge relief for Vodafone Idea. By March-end, the actual cash in hand with the company is likely to be even lower after accounting for cash burn during the quarter. Even so, the deferred payment plan can take the company only so far. Earnings remain way below expenses.
Inside the battle to save Vodafone Idea
Right Stock. Color-codes for the 10 Year X-Ray and Future Prospects tell you the fundamental strength of the stock. To know more, click here. Right Price. MRP - Fair value of the stock. Vodafone Idea Ltd. BSE Share Price. Consolidated basis 10 Year X-Ray provides a snapshot of the important financial parameters that show the fundamental strength of a company.
Vodafone-Idea's long term viability remains under cloud, despite near-term liquidity support: Report. The USD million fund infusion by British telecom giant Vodafone offers near-term liquidity support to Vodafone Idea, but longer-term viability remains under cloud, Credit Suisse has said.
There is a broad consensus that the telecom company will not be allowed to fail. What lifelines are in the works?
Vodafone Idea faces uncertain future over AGR woes
Telecom industry is a very cash starved business in India. The recent implementation of IUC charges by Jio has shown that its even a burden for them. Margins are extremely low. Before Idea Vodafone we need to talk about Jio first. We all know it belongs to the Reliance Industries which has deep pockets. As of now we can see that Jio has started ending this price war. Also we need to understand that Jio is mainly backed by a Oil Company and might suffer if the Oil business suffers. Now Idea Vodafone, so they are among the largest telecom operator in the nation. They have been registering losse They have been registering losses from past 3 years. Their recent rights issue and subsidiary sale have given the 50,cr to reduce their burden.
