Voda Idea: the telecom package a relief for Voda Idea, reshaping fundraising plans: Kapania



The government’s telecommunications program, such as the deferral of statutory contributions, will provide short-term financial relief to Vodafone Idea, while structural reforms will strengthen the long-term loss-making telecommunications company, its chairman Himanshu Kapania said.

Speaking at the phone company’s 26th Annual General Meeting (AGM) on Wednesday, Kapania added that the recently announced reforms would help preserve a healthy market structure of three private players – Reliance Jio, Bharti Airtel and Vodafone Idea ( Vi). He said there was “a change” in the amount of capital the operator now needs and management would do those calculations and seek board approval again. The phone company had spoken in September 2020 of the need to raise Rs25,000 crore, but has not been able to close the funding so far.

“The package will bring short-term financial relief to the company and the underlying structural reforms will strengthen VIL’s operations in the long term,” Kapania said.

Shares of Vi, India’s only loss-making private telecommunications company, closed at Rs 11.25, up 2.46% from BSE on Wednesday.

Earlier this month, the government announced sweeping reforms, including a four-year moratorium on the payment of Adjusted Gross Income (AGR) and spectrum fees, redefining the AGR to exclude non-telecom elements, the removal of spectrum usage charges (SUC) from future auctions, sharply reduced bank guarantee requirements, 100% foreign direct investment (FDI) automatically. The government has also offered options to convert a telecommunications company’s statutory contributions – interest and principle – into equity.

The moratorium on payments specifically allows cash-strapped Vodafone Idea to defer payments worth Rs 24,000 crore to Rs 25,000 crore per year, freeing up money, analysts said.

“The package will improve the liquidity of the company and sends a strong message that the government is extremely keen to ensure that there are more than 3 players in the industry…” said the non-executive chairman.

It was Kapania’s first annual general meeting since the replacement of Aditya Birla Group (ABG) chairman Kumar Mangalam Birla, who stepped down a few months ago amid multiple discussions with the government over the dire financial situation of what was once India’s largest telecommunications company.

Vi, with debt of Rs 1.9 lakh crore and cash flow of Rs 920 crore at the end of June, had warned the government that customers, lenders and employees, among others, would also be affected if the phone company fell. down due to high statutory contributions and no government relief. . He had blamed the industry’s non-viability as the main reason for its failure to raise the planned Rs25,000 crore despite year-long efforts.

The phone company is, however, reworking its fundraising plans.

“There is a change… Once the exact guidelines are available, management will develop a new business plan and will come back to the board of directors to find out the exact financial needs of the business,” Kapania told shareholders.

“He (the management) also talks to other stakeholders and once the board has given its approval, we will come back to the shareholders on the exact need for funding in the future,” he added. .

The promoters of the phone company – ABG and Britain’s Vodafone Group PLC – are thought to be planning to inject new shares, following the industry’s change of scenario after the package. They weren’t willing to inject new stocks before, but are reconsidering their position, people familiar with it said.

The Aditya Birla group and the Vodafone group respectively own 27.66% and 44.39% of the telephone company. He owed the government Rs1.6 lakh crore at the end of June.

Kapania said the financial relief will allow Vodafone Idea to invest in new technologies and services, including 5G “whenever the ecosystem is ready and spectrum is affordable”.

The phone company must first expand its 4G network to compete effectively with rivals Jio and Airtel. Its 4G coverage lags behind its rivals, a major reason it constantly loses subscribers to its rivals, which hurts its revenue. Its user base shrank to around 255 million at the end of June, from 408 million at the time of the merger in August 2018.

But he added that Vi is operating at an “unsustainable price level” and that there is a need to increase prices to improve the company’s financial performance.

Vi recorded a net loss of Rs 7,312.9 crore in the first fiscal quarter through June on income of Rs 9,152.3 crore.


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