Voda Idea deposits Rs 3,354 cr more as AGR dues, says full principal paid

Vodafone Idea on Monday paid a further amount of Rs 3,354 crore to the Department of Telecommunications (DoT) being the balance part of principal amount towards adjusted gross revenue (AGR) liabilities.

"Thus the company has paid the full principal amount of Rs 6,854 crore towards the AGR dues," it said in regulatory filings at stock exchanges.

On March 6, Vodafone Idea had filed its self-assessment of the AGR liabilities with the DoT in which AGR liability principal amount of Rs 6,854 crore was determined for the period from financial years 2006-07 to 2018-19.

The company had earlier paid a sum of Rs 2,500 crore on February 17 and a further sum of Rs 1,000 crore on February 20 towards this liability.

On February 14, the Supreme Court had directed telecom companies to pay the AGR-related liabilities to the government by March 17.

Subsequently, the DoT sent demand notices towards AGR liabilities to telecom operators.

At 12:25 pm, the stock of Vodafone Idea was trading 4.44 per cent higher at Rs 5.88 apiece on BSE Ltd when the S & P Sensex was down by 5.3 per cent.

.

Vodafone Idea rebounds 53% from day's low on hopes of relief package

Shares of Vodafone Idea rallied 38 per cent to Rs 5.80 on the BSE on Friday after media report suggested that the Union Cabinet has likely approved a bailout plan for the stressed telecom industry which proposes to give relief to the telecom companies with respect to their pending adjusted gross revenue (AGR) dues.

The stock of Vodafone Idea bounced back 53 per cent from its intra-day low of Rs 3.78 on the back of heavy volumes. The market price of the telecom services provider was trading at its highest level since January 27, 2020.

At 12:07 pm, Vodafone Idea was trading 33 per cent higher at Rs 5.56 on the BSE, as against a 0.68 per cent rise in the S&P BSE Sensex. A combined 920 million shares have changed hands on the counter on the NSE and BSE till the time of writing of this report.

The rescue package may include a staggered payment schedule for the pending dues, the national daily Times of India reported on Wednesday.

The telecom department - along with the finance ministry and NITI Aayog - is working on the bailout plan, the report said.

Furthermore, according to a Business Standard report, the Department of Telecommunications (DoT) said on Thursday it would reassess the documents submitted by Bharti Airtel, Vodafone Idea, and Tata Teleservices, as part of the companies’ self-assessment of AGR dues. READ HERE

Vodafone Idea on March 6 announced that it had completed assessing its dues linked to AGR. The self-assessment disclosed the company's AGR liabilities to aggregate Rs 21,533 crore including a principal amount of Rs 6,854 crore for the period from FY 2006-07 to FY 2018-19 and interest up to February 2020. Vodafone Idea’s calculation of the AGR liability turned out to be less than half of the government estimate.

Among other stocks, Bharti Airtel was up 4 per cent at Rs 482 on the BSE. The stock hit an intra-day high of Rs 511, recovering 22 per cent from its early morning low of Rs 419. Bharti Infratel, on the other hand, rallied 10 per cent in the intra-day trade to Rs 242, bouncing back 15 per cent from day’s low of Rs 211 on the BSE.

Vodafone Idea pegs dues at Rs 21,533 cr, less than half of DoT estimate

Beleaguered Vodafone Idea Ltd on Friday put its total dues to the government following a Supreme Court order at Rs 21,533 crore -- less than half of what the Department of Telecommunications (DoT) has estimated.

On a day when Vodafone Group CEO Nick Read met top ministers, including Finance Minister Nirmala Sitharaman and Telecom Minister Ravi Shankar Prasad, the UK telecom giant's India joint venture, Vodafone Idea Ltd in a statement said it has already paid Rs 3,500 crore out of the "self-assessed" liability of Rs 21,533 crore.

The DoT, following the Supreme Court ruling in October last year which said that all kinds of income generated by telecom companies will be considered for calculating government dues, had estimated Vodafone Idea's liabilities at over Rs 53,000 crore.

On March 4, Minister of State for Communications & IT Sanjay Dhotre, in a written reply to a question in the Lok Sabha, stated that Idea Cellular owed the government Rs 15,230.37 crore and Vodafone Group of Companies another Rs 37,808.23 crore. Out of the total Rs 53,038.6 crore due from Vodafone Idea, a sum of Rs 3,500 crore has been received, he had said.

On Friday, the company, which was formed following the merger of Idea and Vodafone, in a statement said it has "filed its self-assessment of the AGR liabilities with the Department of Telecommunications. The self-assessment discloses the company's AGR liabilities to aggregate Rs 21,533 crores including a principal amount of Rs 6,854 crores for the period from FY 2006-07 to FY 2018-19 and interest up to February 2020."

"The company has already paid a sum of Rs 2,500 crores on February 17, 2020, and a further sum of Rs 1,000 crores on February 20, 2020, towards this liability," it added.

On a similar self-assessment pattern, Bharti Airtel paid Rs 13,004 crore to the government in two installments.

It had also deposited an additional Rs 5,000 crore "as an ad-hoc payment (subject to subsequent refund/adjustment) to cover differences, if any, arising from the reconciliation exercise with the DoT," it had said on February 29.

The total payout by Bharti Airtel was half of Rs 35,586.01 crore liability estimated by the DoT.

Dhotre in the reply had stated that Bharti Airtel owed Rs 21,682 crore in licence fee and another Rs 13,904.01 crore in spectrum usage charges.

Similarly, Vodafone Idea owed Rs 28,309 crore in licence fee and another Rs 24,729.23 crore in spectrum charges.

According to the DoT, 16 telecom companies owed the government a total of Rs 146,336.98 crore as a fallout of the Supreme Court ruling.

No details of the discussions Read had with Sitharaman and Prasad were immediately available.

Vodafone holds 45.2 per cent stake in Vodafone Idea where Aditya Birla Group is the other promoter.

Emerging from the over 30-minute meeting with Prasad, Read refused to comment on whether the British telecom giant will exit India, saying, "No comments."

Vodafone Idea has been at the forefront of seeking a bailout package from the liability imposed by the Supreme Court ruling.

It had recently told the government that it would not be able to pay the full dues unless state support is extended to survive the crisis.

The company has made a strong plea for setting off Rs 8,000 crore of GST credits against part of the liability. For the remaining dues, it wants payment to be staggered over 15 years at a simple interest rate of 6 per cent after a three-year moratorium. It also wants drastic cuts in licence fee and fixing of a minimum price for calls and data.

Vodafone Idea Chairman Kumar Mangalam Birla has held multiple rounds of discussions at the telecom and finance ministries over the last few weeks to look for a solution to keep the company's operations on track.

In December, Birla had said Vodafone Idea may have to shut shop if there is no relief on the statutory dues. "If we are not getting anything, then I think it is the end of the story for Vodafone Idea," Birla had said. "It does not make sense to put good money after bad... We will shut shop."

Even Read had recently stated that the situation in India is critical, following the Supreme Court's AGR ruling.

Voda Idea pays Rs 3,043 cr, Airtel gives Rs 1,950 cr as spectrum dues 69/

Troubled Vodafone Idea on Tuesday paid about Rs 3,043 crore to the Department of telecommunications (DoT) towards deferred spectrum dues, PTI reported. While Bharti Airtel paid Rs 1,950 crore to the government, Reliance Jio has also deposited Rs 1,053 crore payment with the DoT.

Deferred spectrum dues are essentially installment payments that are made by telcos for airwaves bought in past auctions. The move assumes significance as VIL has been under financial pressure and is confronted with AGR (Adjusted Gross Revenue) liabilities of over Rs 53,000 crore.

VIL has so far paid Rs 3,500 crore in two tranches towards its AGR liabilities. Quoting sources PTI confirmed that the company has made the payment of around Rs 3,043 crore towards deferred spectrum liability. This is the last lot of payments that telcos will make towards deferred spectrum liabilities, as the Union Cabinet had late last year approved a two-year moratorium on such spectrum payment dues.

ALSO READ: Tatas make additional payment of Rs 2,000 crore towards AGR dues: Report

The development comes days after the Cellular Operators’ Association of India (COAI), a body representing the telecom industry, has urged the government to provide relief to improve the health of the telecom sector which is reeling under the adjusted gross revenue crisis.

The COAI in a letter to Telecom Secretary Anshu Prakash, asked for easier terms for payment of statutory dues by telcos, including an extension of loans at lower interest rates to cover AGR liabilities, and also a fast implementation of floor prices to rescue the troubled sector.

I-T dept reverses stance on NCLAT's proposed demerger order of Reliance JioReliance Jio has also deposited Rs 1,053 crore payment with the Department of Telecommunications (DoT).

Earlier in the day, Tata Teleservices paid an additional amount of about Rs 2,000 crore to the telecom department on ad hoc basis towards their AGR liabilities, PTI reported. The additional payment of over and above Rs 2,197 crore it has already submitted to the government, is aimed at covering any reconciliation differences.

The government estimated Tata's dues at about Rs 14,000 crore.

Vodafone Idea reverses losses, jumps 48% on heavy volumes

Shares of Vodafone Idea jumped 48 per cent to Rs 4.49 on the BSE on Wednesday on the back of heavy volumes on report that the government is unlikely to invoke bank guarantees for now. Till 12:29 pm, a combined 355 million shares changed hands on the counter on the NSE and BSE.

In the past seven trading days, the stock has tanked 42 per cent after the Supreme Court dismissed the petitions of telcos seeking a staggered option to pay their Adjusted Gross Revenue (AGR) related dues.

According to a report by The Economic Times, the government is unlikely to invoke Vodafone Idea’s bank guarantees for now, even as the officials of the telecom and finance ministries met Cabinet secretary Rajiv Gauba to discuss ways to ensure that the sector retains three private players, officials said.

The Department of Telecommunications (DoT) has sought legal opinion including that of Solicitor General Tushar Mehta on whether to invoke bank guarantees of companies in case they fail to pay their full AGR dues before the next date of hearing on March 17. Any move to invoke or encash the bank guarantee would put the operation of highly-stressed Vodafone Idea at risk, Business Standard reported on Tuesday.

Meanwhile, the rating agency India Ratings and Research (Ind-Ra) on Tuesday downgraded Vodafone Idea’s long-term issuer rating to ‘IND B’ from ‘IND BBB-’ while maintaining it on rating watch negative (RWN).

“The RWN reflects significant uncertainties over the outcome of the modification application filed by telcos; the quantum of the AGR-related liabilities; and Vodafone Idea’s ability to pay the AGR dues. The RWN also reflects uncertainties over other liquidity events, such as the possible risk of accelerated payment of financial liabilities and likely delays in asset monetization”, Ind-Ra said in a press release.

Vodafone Idea default can raise India's fiscal deficit by 40 bps

A possible default by Vodafone Idea (Voda-Idea) in paying its adjusted gross revenue (AGR) dues and the company shutting down operations will have serious repercussion on the telecom and banking sectors in particular and the economy in general with large magnitude of debt default, job losses and customer annoyance as the telco faces an imminent risk of shutdown.

A default by Voda-Idea and the company shutting shop, analysts say, could increase India’s fiscal deficit by 40 basis points (bps). While presenting the Union Budget for financial year 2020-21 (FY21), the government had pegged the fiscal deficit for FY21 at 3.8 per cent of GDP (gross domestic product) and at 3.5 per cent for FY20.

“Voda-Idea has gross debt of Rs 1.2 trillion, of which around Rs 900 billion is government’s deferred spectrum debt, while around Rs 250 billion is bank debt. A default of such a large scale could increase India’s fiscal deficit by nearly 40 bps, thus having the deepest impact on government receipts despite winning the suit, while creating ripples in the banking sector,” wrote Gautam Duggad, head of research for institutional equities at Motilal Oswal Financial Services (MOFSL) in a recent note.

The social impact of this could be worse as 300 million subscribers may face the annoyance of network shutdown and churn. Reports peg the job loss at Voda-Idea at a staggering 13,500 employees. This is merely the direct impact, while the indirect impact on multiple vendors and other stakeholders could be even worse.

“Ironically, the government, despite winning the suit, could see the biggest impact through deferred spectrum debt default Rs 900 billion. Even with some relief of AGR liability, Voda-Idea would have found it difficult to service debt and capex needs through its operating cash flow,” Duggad says.

The decision to expedite the payment by last week took the companies and the Street by surprise. Most analysts had expected the government to relax the payment timeline and give companies room to secure funding.

“Our base case had built relief in terms of payment options. This is as even with recent price hikes VodaIdea will face challenges to pay the AGR dues. We expected a moratorium for two years and staggered payments post that over a period of time. Without relief on AGR dues, we see solvency challenges for VodaIdea. Even with the reliefs, AGR dues are a drag and will affect operations, and we expect it to lose market share,” wrote Piyush Nahar, an equity analyst at Jefferies in a recent note.

Bharti Airtel to weather the storm

Most analysts remain bullish on Bharti Airtel. They believe the company is better placed and can pay the whole amount by March.

“In case of Voda-Idea going into NCLT, Bharti will gain substantial market share and will be the beneficiary. It, however, will also see increased cost and capex in near term. In case of Voda-Idea getting relief it will still gain market share though valuations then limit upside. We retain Hold as we await more clarity,” Nahar said.

If we assume a duopoly scenario, Duggad of MOFSL expects Bharti to generate incremental Rs 100 billion in earnings before interest, taxes, depreciation and amortisation (Ebitda) assuming it gets 40 per cent revenue share and 50 per cent Ebitda margin (building incremental network cost for higher capex intensity). 118 million broadband customers and 3.8b GB of data traffic could increase Bharti/RJio traffic volume by about 30-40 per cent. “At 10x EV/EBITDA, Bharti Airtel could derive a blue-sky target price of Rs 825,” Duggad says.

AGR dues: After SC denies relief, is it the end of road for Vodafone Idea?

There was gloom at the headquarters of Vodafone Idea in Mumbai on Friday, with top executives saying the company would not be able to take the additional Rs 54,000-crore hit and it would now end up in bankruptcy court.

“It would be difficult for the company to survive after this judgment,” said a Vodafone executive.

Vodafone Idea’s net worth (or shareholders’ equity) was down 73 per cent year-on-year to around Rs 17,600 crore at the end of the December 2019 quarter after the company reported a net loss of around Rs 6,400 crore during the quarter. Cumulatively, the company has lost nearly Rs 45,000 crore in the last four quarters, eroding its net worth to its lowest level in three-year.

Analysts said a such a low level of net worth, coupled with continuing losses in operations, ruled out the possibility of the company getting fresh loans from lenders to fund its adjusted gross revenue (AGR) dues.

“On what basis will banks give fresh loans to the company? The company is running out of assets to back fresh borrowing,” an analyst said.

After its third-quarter results, Vodafone Idea’s long-term debt-to-equity ratio shot up to 5.7x, making it one the most indebted companies in the country.

In comparison, its leverage ratio was 1.3x at the end of the March 2019 quarter. The ratio worsened to 6.6x at the end of December 2019 if the current maturities of its long-term debt were to be taken into account.

The company has to repay long-term debts worth Rs 14,800 crore by the end of FY20, according to its filing for Q3FY20.

Not surprisingly, many analysts are expecting the company to file for bankruptcy once its net worth turns negative in the next few quarters.

Vodafone Idea’s poor financial performance also led to a sharp decline in its market capitalisation in the past one year, making it tough for the company to raise fresh equity in the way Bharti Airtel did a few weeks ago.

At its current share price, Vodafone Idea has a market capitalisation of around Rs 10,000 crore, which is a fraction of its impending liabilities and lowest since its listing in 2007 as Idea Cellular.

The company had a market capitalisation of around Rs 22,000 crore at the time of its listing in March that year. Analysts said the company needed a large equity infusion from its promoters — Aditya Birla group and Vodafone plc — to stay solvent and pay its AGR dues.

The promoters have decided not to put in more cash into the company after both lost a sizeable amount by investing in the company’s Rs 25,000-crore rights issue last year.

Vodafone plc owns 44.39 per cent in Vodafone Idea while the Aditya Birla group has 27.18 per cent.

As the Aditya Birla group has not given any corporate guarantees on loans worth Rs 1.15 trillion, there will not be any negative impact on the group companies and their losses be limited to the equity stake in the company, said an analyst.

VIL had made a provision of Rs 44,150 crore (Rs 27,610 crore for licence fees and Rs 16,540 crore towards spectrum usage charges) till the quarter ended September 30, 2019, for the disputed liabilities towards AGR. The existing liquidity (about Rs 15,390 crore as of September 30, 2019) will be insufficient if there is a payout of licence fee liabilities of Rs 27,610 crore.

Nick Read, chief executive officer of Vodafone plc, warned in November last year Vodafone Idea faced an imminent collapse after the Supreme Court judgment on October 24, which asked the companies to pay the dues within three months. The deadline expired in January this year.

This raises the possibility of Vodafone exiting India if Vodafone Idea is forced to suspend operations due to financial difficulty. In the past Vodafone plc has exited around eight markets. But those exits have been largely due to commercial reasons and the company made money in most of these exits.

For example, Vodafone plc exited its US joint venture Verizon Wireless for a consideration of nearly $130 billion while it sold its stake in an Egyptian joint venture for nearly $2.4 billion.

Vodafone Idea posts Rs 6,439-cr Dec-quarter loss; subscriber base falls 21%

Vodafone Idea reported a consolidated loss of Rs 6,439 crore for the December quarter as compared with a Rs 5,005-crore loss in the same period in 2018-19.

This is higher than analyst estimates, which had pegged the loss at Rs 4,000 crore, after being in the red by a record Rs 50,922 crore in the September quarter. Exceptional items in the quarter were valued at Rs 633 crore, largely on account of integration and merger-related costs.

While a large part of the liabilities on account of aggregate gross revenues (AGRs) was in the September quarter (just over Rs 30,000 crore), the company made a Rs 53-crore balance provision for those in the December quarter. The company posted revenues of Rs 11,089 crore, down 6 per cent over the year-ago quarter, and this was in line with analyst estimates.

Though the churn, which was at 5 per cent a year ago, has come down to 3.3 per cent in this quarter, its subscriber base saw a decline of 21 per cent YoY to 304 million. Bharti Airtel’s subscriber base was flat at 283 million while Jio reported a 32 per cent increase in subscribers to 370 million.

On a sequential basis, the company posted a growth rate of 2.3 per cent. While the price hike has not so far been reflected in the performance, the gains on a sequential basis were led by 4G additions and improvement in average revenue per user (ARPU).

While 4G addition growth was 9.4 per cent, ARPU growth was 1.8 per cent. On a YoY basis, ARPUs were up 22 per cent.

Led by revenue growth and synergy gains from the merger, operating profit on sequential gains was up 0.7 per cent to Rs 3,421 crore.

Higher interconnect costs, however, limited the gains. The company indicated it had achieved 85 per cent of its targeted operating expense synergy of Rs 8,400 crore and is on track to achieve the synergy gains by the first quarter of FY21.

Net debt went up a bit to Rs 1.033 trillion, against Rs 1.019 trillion in the September quarter.

On the AGR issue, the company’s managing director and chief executive officer, Ravinder Takkar, said the company was engaged with the government, seeking relief on AGRs as well as other matters. The company has filed for modifying the supplementary order with the Supreme Court after its earlier petition was dismissed.

On the operational front, Takkar indicated after several quarters of pressure on the top line, Vodafone Idea witnessed a revenue turnaround from September. The tariff increase in December is expected to reflect in revenue performance in the coming quarters.

Vodafone Idea posts Rs 6,439-cr Dec-quarter loss; subscriber base falls 21%

Vodafone Idea mobile customer base drops by 36.3 mn to 336.3 mn in Nov

Vodafone Idea's mobile consumer base declined by around 3.63 crore to 33.63 crore in November, according to a source.

The telecom operator had reported an increase of 1.89 lakh mobile customers on its network in October.

"Vodafone Idea HLR (home location register) subscriber in October were 37,26,76,689. In November, it has come down to 33,63,57,324. There is a difference of 3,63,19,365 as per the company report submitted to Trai," the source told PTI.

However, Vodafone Idea declined to comment on this information.

The source said the company keeps deleting inactive subscribers and the reduction is the result of the same.

"The company has reduced time period of recording active subscriber from 120 days to 90 days. Had it been the same period, the reduced number would have come at the end of December," the source said.

Vodafone Idea and Bharti Airtel had raised call and data charges by up to 50 per cent from December 3 onwards.

Voda Idea falls 9% after chairman says will shut in absence of govt relief

Shares of Vodafone Idea slumped 9 per cent to Rs 6.66 on the BSE on Friday after its chairman Kumar Mangalam Birla said the company will shut down if the government does not provide relief on the liability it faces in past statutory dues following a Supreme Court order.

The Bombay Stock Exchange (BSE) however said, the exchange has sought clarification from Vodafone Idea about Birla's comment. The company is yet to reply.

Market leader Bharti Airtel, Vodafone Idea and other telecom players have to pay as much as Rs 1.47 trillion in payment of telecom license fee and spectrum usage charge together with interest and penalty for past 14 years. Both Airtel and Vodafone Idea have petitioned the government for relief in waiver of interest and penalty, which will halve the dues, and also filed a review petition in the Supreme Court.

"If we we are not getting anything then I think it is end of story for Vodafone Idea," Birla said at the HT Leadership Summit when asked about the future of Vodafone Idea in absence of a government relief on payment of Rs 53,038 crore dues.

"It does not make sense to put good money after bad. That would be end of story for us. We will shut shop," he said in a response when asked if Vodafone Idea will put in more money.

Birla's Idea Cellular and British telecom giant Vodafone plc's India unit had merged last year to compete with the onslaught of free voice calling and dirt cheap data unleashed by richest Indian Mukesh Ambani's Reliance Jio. In the process, it accumulated Rs 1.17 lakh crore debt and had just weeks back posted corporate India's biggest loss of Rs 50,900 crore (in September quarter) after it provisioned for the liability arising from the Supreme Court upholding the government's position on what base should statutory liabilities be calculated.

At 2 PM, the stock was down 7 per cent at Rs 6.83 as compared to the 0.7 per cent dip in the benchmark S&P BSE Sensex. A total of 41.9 crore shares had changed hands on the NSE and BSE combined.

Vodafone Idea will shut shop if govt doesn't provide relief: KM Birla

Vodafone Idea will have to be closed down if the government doesn't provide relief that the company has sought, its chairman Kumar Mangalam Birla said on Friday.

"We will have to shut shop," Birla said on a query about the course of action for the company going ahead in the absence of government relief.

He was speaking at the Hindustan Times Leadership Summit here.

Birla indicated that his group will not invest any money in the company in the absence of relief from the government.

"There is no sense that good money should follow bad money," he said.

Birla said the company will have to opt for insolvency route in the absence of relief.

Under financial stress, Voda-idea to 'suitably raise tariff' from Dec 1

Debt-ridden telecom operator Vodafone Idea on Monday said it will raise mobile services rates from December 1 in the wake of ongoing financial stress.

"To ensure that its customers continue to enjoy world class digital experiences, Vodafone Idea will suitably increase the prices of its tariffs effective December 1, 2019," Vodafone Idea said in a statement.

The company, however, did not disclose the range or details of the proposed tariff hike.

Vodafone Idea last week reported consolidated loss of Rs 50,921 crore - highest ever loss posted by any Indian corporate - for the second quarter ended September 30, on account of liability arising out of the Supreme Court order in the adjusted gross revenue case.

The Supreme Court last month ruled in favour of the government and directed telecom companies, including Vodafone Idea, to pay dues as demanded by the Department of Telecom.

Vodafone Idea said that now its ability to continue business will depend on reliefs sought from the government and positive outcome of the legal option it has.

"The acute financial stress in the telecom sector has been acknowledged by all stakeholders and a high level Committee of Secretaries (CoS) headed by the Cabinet Secretary is looking into providing appropriate relief," the statement said.

Vodafone Idea has around 300 million mobile subscribers.

AGR impact: Banks nervous as losses mount for Vodafone Idea, Airtel

The adverse fallout of huge losses posted by telecom majors Vodafone Idea and Bharti Airtel in the second quarter, on provisions made for dues in adjusted gross revenue (AGR), has left commercial banks nervous.

Bankers said that at present, both operators are current in their repayments. However, the concern is over the future debt repayment capacity in case these entities take more debt to finance operations and meet repayment obligations.

Vodafone, the joint venture partner in the Aditya Birla group entity, has categorically said that given the significant capital already invested, it will not inject further group equity into India.

“When an owner expresses the inability to make further investments, the issue is serious. Banks are analysing implications and awaiting clarity from the secretary panel,” said senior executives with a large public sector bank.

According to Reserve Bank of India data, commercial banks’ exposure to the telecommunications sector rose to Rs 1.15 trillion in September 2019, from Rs 81,126 crore in September 2017. State Bank of India’s exposure to the industry increased to Rs 35,735 crore as of September 2019, from Rs 25,538 crore a year ago.

AGR impact: Banks nervous as losses mount for Vodafone Idea, Airtel

Vodafone Idea and Bharti Airtel reported a whopping combined loss of close to Rs 74,000 crore in the September 2019 quarter, as the leading telecom operators were hit by statutory dues arising from the recent Supreme Court ruling on AGR.

While Vodafone Idea posted a loss of Rs 50,921 crore — the highest-ever quarterly loss by any corporate in India — Airtel reported loss to the tune of Rs 23,045 crore.

The issue had been dragging on for the past 14 years, with telecom providers and the Department of Telecommunications (DoT) locked in a battle over the definition of AGR.

While the telecom service providers insisted that AGR included only revenue from core operations, the DoT maintained that AGR also included revenue from operations other than the core ones.

AGR assumes significance because it is the basis on which the DoT calculates levies payable by operators. Telecom companies pay 3-5 per cent and 8 per cent of the AGR as spectrum usage charges and license fees, respectively, to the DoT.

Vodafone denies India market exit rumour, says actively engaging with govt

Amid concerns around how telecom operator Vodafone Idea (VIL) will cope with the Supreme Court ruling on adjusted gross revenue (AGR) payments, the company and its UK based JV partner Vodafone Group issued separate statements to assuage investor concerns. There have been rising concerns that the UK based Vodafone Group would exit the Indian telecom joint venture, according to some reports.

“Vodafone is aware of the unfounded and baseless rumours circulating in some of the Indian media that we have decided to exit the (India) market. We would like to categorically state that this is not true and is malicious,"said Vodafone Group in a statement.

The statement further noted that Vodafone is actively engaging with government and they are fully supportive of their local management as they continue to manage the joint venture (with Aditya Birla Group) in these challenging times.

In response to the same queries, VIL issued a statement to the exchanges stating "As regards exit of India operations by Vodafone Group is concerned, we wish to inform you that the Company (VIL) is not aware about anything on the subject as it pertains to Vodafone Group and hence cannot comment on the same."

Vodafone Group has struggled to keep its losses in check over the past year with VIL only adding to the burden since merger last year.

VIL had already issued a statement to deny reports that the company had approached lenders for a debt recast.

" We categorically deny and dismiss this as baseless and factually incorrect. We have not made any request for debt recast to any lender or asked for reworking of payment terms. We continue to pay all our debts as and when these fall due,"informed the company.

Rating agency CARE has downgraded its rating on VIL's long-term loans and debentures from “A” to “A-” and also paced the rating under watch with negative implications.

The revision in long-term ratings factors in the Supreme Court’s (SC’s) recent ruling that telecom players have to include non-core revenues in their AGR to calculate their license fee dues. Based on the court order, the Department of Telecommunications (DoT) can now raise its demand from VIL to Rs 28,309 crore. The company has to comply with the SC order within three months.

Analysts expect this payment to put VIL on an extremely weak footing compared to its telecom rivals due to mounting subscriber losses and integration hurdles.

Vodafone Idea reaches out to lenders for debt revamp as losses mount

Vodafone Group Plc’s Indian venture, reeling under $14 billion of net debt, mounting losses and dwindling subscribers, has approached creditors for better payment terms to revive the sinking carrier, people with direct knowledge of the matter said.

Vodafone Idea Ltd., formed by last year’s merger of the British telecommunications firm’s local unit with billionaire Kumar Mangalam Birla’s Idea Cellular Ltd., has warned lenders that it won’t be able to honor its commitments for long under current conditions, the people said, asking not to be named as the discussions are private. One of its requests was a temporary halt to loan payments, although no formal proposal has been made, two of the people said.

A spokesman for Vodafone Idea said the company hasn’t asked lenders to rework payment terms and the carrier continues to pay all its debts as and when they fall due. “The financial stress in the telecom sector is well acknowledged and all telecom operators have asked for requisite help in reducing it,” the firm said in the statement. A spokesman for the Newbury, UK-based Vodafone Group pointed to a filing by the India venture in July that stated Vodafone Idea had been in discussions with lenders for some waivers in the prior quarter. He didn’t comment further.

The distress at India’s No. 2 phone operator deepened last week after the nation’s top court ordered it to pay about $4 billion in past dues, dealing a fresh blow to the struggling business. Vodafone Idea has been losing subscribers and reporting losses every quarter since the two partners announced their merger in 2017, while the entry of billionaire Mukesh Ambani’s wireless provider Reliance Jio Infocomm Ltd. a year earlier with free calls and cheap data added to the venture’s woes.

Court Ruling

The court ruling on Oct. 24 was part of a wider legal dispute over the way Indian carriers calculate revenue. The nation’s top court upheld the government’s method, and told several companies, including now-defunct ones, to pay about $13 billion in total.

An upfront liability for Vodafone India may compel it to appeal to the National Company Law Tribunal, analysts G.V. Giri and Balaji Subramanian at IIFL Securities Ltd. wrote in a report last week, referring to the quasi-judicial body that handles insolvency petitions.

Should the government take substantial steps to ease the burden of the carriers, Vodafone Idea may not press for a debt recast, some of the people said.

Vodafone Group, which has been pulling out of far-flung markets to focus on Europe, isn’t keen to plow any more money into the Indian venture, which is “ring-fenced,” Chief Executive Officer Nick Read said in September. The Newbury, England-based firm agreed to sell its New Zealand unit for $2.2 billion in May.

The British firm reluctantly participated in a rights issue by Vodafone Idea earlier this year that raised 250 billion rupees ($3.5 billion), some of the people said.

The losses at the Indian carrier may be pushing Vodafone Group toward the exit door, more than a decade after it entered what was once its most promising market. Since its acquisition of Hutchison Whampoa Ltd.’s Indian operations in 2007, the UK company has been dogged by a $2.2 billion tax bill -- a case it’s still fighting with the Indian government despite a ruling in its favor by the nation’s top court in 2012.

In a filing on July 26, Vodafone Idea said in the quarter through June 30 it classified 102 billion rupees from non-current borrowings to current maturities of long-term debt for not meeting some covenant clauses for specified financial ratios. During the quarter “the company has exchanged correspondences/been in discussions with these lenders for the next steps/waivers,” it said.

Vodafone Idea has enough cash reserves to service its debt obligations, for the time being, one of the people said. The company had cash and equivalents worth 75.5 billion rupees as of March 31, according to data compiled by Bloomberg.

Jio Shake-Up

Vodafone Idea has been lobbying for government intervention to correct a market that’s been skewed by freebies thrown around by Ambani’s Jio, one of the people said. The upstart has elbowed into the top three by signing up more than 350 million subscribers in the three years since its debut. The growth of Jio forced some incumbents to merge or sell out. One of the casualties of this shake-up was the carrier run by Ambani’s younger brother, Anil. Reliance Communications Ltd. slipped into insolvency earlier this year.

The intense competition for a slice of the nation’s 1 billion-plus phone users has driven tariffs to less than a cent, weighing on earnings for those who survived the price war. The investments needed to roll out their networks across the country and the price of airwaves -- among the highest in the world thanks to a government that counts on the revenue to finance its budget deficit -- have also piled on debt.

Debt Pile-up

After spending $50 billion to build Jio’s 4G network, parent Reliance Industries Ltd. had a net debt of 1.54 trillion rupees as of end-March, Ambani said in August. Tycoon Sunil Mittal’s Bharti Airtel Ltd., which lost its top ranking after Jio’s onslaught, had a net debt of 930 billion rupees as of June 30, according to the company.

Lenders to Vodafone Idea through loans and so-called bank guarantees include State Bank of India, the nation’s biggest by assets. A representative for the bank didn’t respond to a request for comment.

India’s Telecommunications Minister Ravi Shankar Prasad said this month that the government is planning some reforms in the way spectrum is priced. The carriers are facing billions of dollars more in expenditure as authorities prepare to auction 5G airwaves before the end of the financial year ending March.

On Tuesday, a government official in New Delhi said a panel of senior bureaucrats will look into the demands made by telecom companies to defer airwave payments due by March 2021 and 2022.

Vodafone, with the help of Birla, its partner, is seeking spectrum at reasonable prices and is also pushing for some flexibility with lenders, they said.

Top Vodafone officials meet telecom secretary ahead of spectrum auctions

Vodafone Chairman Gerard Kleisterlee, Chief Executive Officer Nick Read and Vodafone-Idea Managing Director and CEO Ravinder Takkar on Monday met telecom secretary Anshu Prakash at a time when the government is busy preparing for the upcoming spectrum auctions.

Vodafone Idea has been seeking a two-year moratorium on its annual spectrum payment citing debt and stress on balance sheet.

Talking to media after the meeting, Nick Read said, “We are absolutely focused on the integration of business between Vodafone and Idea.”

Both Read and Kleisterlee refused to comment on the outcome of the meeting with Prakash or the company’s future course of action in India.

This is the second time in a month that executives of Vodafone-Idea met government officials. Aditya Birla Group Chairman Kumar Mangalam Birla, in September, had called on telecom minister Ravi Shankar Prasad for deferring statutory payments in a sector that was not generating enough cash to even service loans.

Vodafone and Idea participated in five spectrum auctions in 2010, 2012, 2014, 2015 and 2016 before merging their businesses in August 2018. In the auctions, Vodafone acquired spectrum worth Rs 79,343 crore: the highest in terms of value compared to bids made by other operators. Idea purchased spectrum worth Rs 63,597 crore in the auctions.

Vodafone Idea’s net loss in the first quarter of the current financial year narrowed to Rs 4,873.9 crore for the April-June quarter, helped by a change in accounting standard and lower operating costs. Its revenue fell as some subscribers left and others moved to lower tariff plans.

The adoption the Ind AS 116 accounting standard resulted in a positive impact of Rs 120 crore in profit after tax (PAT) for the quarter.

Revenue for the quarter ended June fell 4.3% on quarter to Rs 11,269.9 crore, hurt by subscribers leaving due to the company’s minimum recharge plans.

The telecom sector has been battered by falling tariffs, eroding profitability, and mounting debt, in the face of stiff competition triggered by disruptive offerings of Reliance Jio, owned by Mukesh Ambani.

The industry has been seeking urgent relief measures for the troubled sector, entailing cut in levies like licence fee and spectrum charges, and release of GST input tax credit locked up with the government.

Ravinder Takkar appointed Vodafone Idea CEO; Balesh Sharma steps down

Mobile operator Vodafone Idea on Monday said Balesh Sharma has stepped down as its CEO citing personal reasons.

Ravinder Takkar, currently Vodafone Group's representative in India, will be appointed as the new MD and CEO with immediate effect, the company said in a statement.

"The Board of Vodafone Idea today announced that it has accepted Balesh Sharma's request for personal reasons to step down as CEO of Vodafone Idea. Balesh will be taking up a new role with Vodafone Group, which will be announced in due course," the statement added.

Bharti Airtel replaces Vodafone Idea in second spot by mobile revenues

Focus on data subscribers and weeding out low revenue customers have helped Bharti Airtel, while its peer Vodafone Idea could not implement the strategy.

However, network and content costs are on the rise for Bharti as it witnesses a steady rise in mobile data customers.

Further, Airtel’s reported mobile revenues for the April-June quarter (Q1) was Rs 10,866 crore. This makes it the number 2 player after Reliance Jio in terms of mobile services revenues, analysts claimed.

Vodafone Idea, which does not share the break-up of revenues, reported an overall revenue figure of Rs 11,269 crore for Q1.

A Mumbai-based analyst noted that Vodafone Idea draws over Rs 600 crore from enterprise customers as well as broadband (or fixed services). Adjusting for it, the mobile service revenues for Vodafone Idea would be Rs 10,669 crore, making it the third-largest telecom firm by mobile revenue after Jio’s figure of Rs 11,679 crore.

Merged Vodafone Idea does not share the break-up of revenues. However, according to analysts, the comparative fixed revenue value should be around Rs 600 crore. Vodafone Idea said it reports only consolidated revenues.

Bharti Airtel lost only 1.5 million subscribers in June quarter, against 14 million subscribers lost by Vodafone Idea. What worked for Airtel was that its data traffic growth was 13 per cent sequentially and its average data usage was even higher than Jio’s (a 4G-only player) at 11.9 gigabyte per month per user.

However, as its mobile 4G data customers increased by 63.3 per cent to 95.2 million in Q1, compared to 58.3 million in the corresponding quarter last year, the company’s content costs also grew.

“In 2018-19 (FY19), content costs (for Airtel) rose 30 per cent year on year (YoY), reflecting the impact of content deals with Zee5 and Netflix,” said G V Giri, analyst, IIFL.

Its passive infrastructure charges, too, rose 12 per cent. Earnings before interest, tax, depreciation, and amortisation (Ebitda) margin declined on account of network expansion.

Airtel had managed to keep operating expenditure costs under control over the past two years, with only 7.5 per cent growth YoY.

The aggressive spending on content has, however, converted to rapid growth in Airtel’s 4G base in the past one year. In Q1 FY19, Airtel and Vodafone Idea had almost equal, roughly 58 million, 4G subscribers. In Q1 of 2019-20, Airtel raced ahead to 95 million subscribers, 11 million ahead of Vodafone Idea’s.While Vodafone Idea gained 4 per cent in terms of average revenue per user (ARPU), even as it lost 14 million subscribers, Airtel registered an industry-best ARPU of Rs 129 for Q1, a 5 per cent growth. In the bargain, it only lost 1.5 million subscribers.

Analysts see this as a positive sign. Airtel was able to retain its top slot in the market in terms of revenue, as its top line was up 2.8 per cent at Rs 15,345 crore. Vodafone Idea posted revenues of Rs 11,269.9 crore in Q1 and Jio’s revenues were Rs 11,679 crore. Bharti Airtel’s India revenue is an integrated number comprising wireless, landline and broadband services.

In Q1 of the current financial year, Airtel’s mobile revenues witnessed YoY growth of 3.7 per cent.

In comparison, Vodafone Idea saw revenue slipping 4 per cent sequentially, as its strategy to implement similar minimum recharge plans to boost revenue did not see the desired offtake.

Analysts at JM Financial said they did not think Airtel was gaining meaningfully at the expense of Vodafone Idea yet.

It is still incurring subscriber losses, albeit modest, and its revenue gains are driven entirely by ARPU — that is, minimum ARPU recharges and ‘Airtel Thanks’.

Lack of a counter to JioPhone and smaller 4G coverage, compared to Jio, remain key challenges.

Vodafone Idea hires Bank of America, Morgan Stanley for $1.9-bn fibre sale

Vodafone Idea has hired Bank of America and Morgan Stanley to help sell its fibre assets as India's largest mobile carrier by users seeks to bolster its finances, sources said.

The bankers will initiate discussions with potential buyers for the fibre assets, which could be valued at as much as Rs 130 billion ($1.9 billion), the sources said. A final decision has yet to be made on the valuation and the stake to be sold, and the company could bring in more banks for the sale, the people said.

Representatives for Vodafone Idea and Morgan Stanley declined to comment, while a Bank of America spokesman didn’t immediately respond to requests for comments. A deal, if successful, would help the phone-service provider add to the funds it’s been raising to pare debt and fend off rivals Airtel and Jio Infocomm, an upstart that upended the market after its debut in 2016.

Vodafone Group pledges entire 44.39% stake in Vodafone Idea with 7 banks

Vodafone Group has pledged its entire 44.39 per cent stake in Vodafone Idea with seven foreign banks. 

Vodafone Idea had recently concluded a Rs 25,000 crore rights issue, that was oversubscribed nearly 1.08 times.

According to a report, shareholders of Vodafone Promoter Indian and Vodafone Promoter Mauritius have pledged their 44.39 per cent stake in Vodafone Idea. The Vodafone group owns the stake through 12 entities based in India and Mauritius. 

Shares of Vodafone Idea plunged 7.12 per cent on the BSE on Wednesday to close at Rs 14.35 apiece.

At that price, Vodafone Group’s shares were worth nearly Rs 18,304 crore.

The shares are pledged for 'financing arrangements' in favour of HSBC Corporate Trustee Company, which is acting as a trustee for BNP Paribas, HSBC Bank Plc, ING Bank NVSingapore branch, StanChart Bank, Bank of America Merrill Lynch and Morgan Stanley Senior Funding Inc.