Vodafone Idea can raise funds through equity sale or promoters can infuse capital which can be used for clearing dues, non-profit entity Telecom Watchdog said in a letter to telecom minister while demanding rejection of the debt-ridden company's request seeking more time to pay dues of Rs 8,292 crore. Vodafone Idea (Vi) has approached the government to seek one-year moratorium on payment of spectrum instalment of over Rs 8,200 crore, due in April 2022.
Vi, in a letter to the telecom secretary on June 25, 2021, said it would be unable to pay the instalment of Rs 8,292 crore due on April 9, 2022 due to cash being used for payment of AGR (Adjusted Gross Revenue) dues and the inability of the operations to generate the required cash in a predatory pricing situation.
Vi has also said that while it is working on raising new funding for the past six months, investors are not willing to invest in the company because they believe that unless there is a significant improvement in consumer tariffs, the health of the industry will not recover and they will incur a loss on their investment.
Telecom Watchdog in a letter dated July 3 alleged that there is no basis in Vi representation that investment is not coming to India due to lower tariffs and these "false claims by VIL are made with an ulterior motive to avoid payment of the next instalment of government dues." When contacted, a Vi spokesperson said, "Industry players have pointed out the tremendous stress in the telecom sector. COAI, the industry body representing all three private operators has over the last two years pointed out the need for support to the sector and unanimously asked for Floor pricing to be set for restoring the health of the sector. We would not comment on speculative commentary and ill-informed conclusions."
The non-profit entity said that Vi promoters, Kumar Manglam Birla and Vodafone Group Plc are financially very strong and their reluctance in clearing government dues is not proper. According to the entity, Birla has a personal net worth of Rs 99,000 crores which is almost 50 percent more than his net worth last year and Vodafone Group Plc's market valuation was Rs 3,40,000 crore as of July 2, 2021.
"Both could have infused funds in the company to ensure timely payment of the government dues. Both have respectable images across the globe and should not have any constraint or difficulty in raising funds apart from improving the operational performance of the company," the letter said. Promoters of Vi have made public statements that they will not infuse any fresh funds into the company.
Telecom Watchdog alleged that the request of Vi inability to raise funds establish its mismanagement of affairs in terms of operation and financial management. "It (Vi) has miserably failed to raise funds by dilution of equity and upgrade its networks with the latest technology to reduce cost etc.," the letter said. The entity said the request of Vodafone Idea should not be considered as there cannot be any "factually incorrect misleading statements than those given by VIL" on the financial health of the Indian telecom sector.
It said that both Jio and Bharti Airtel have raised funds by diluting their equity which shows that the Indian telecom sector is a bright star and Vodafone Idea request should be rejected as "there is no basis in VIL representation that investment is not coming to India due to lower tariffs". Telecom Watchdog said that the government cannot continue to extend benefits just to help and keep afloat one single company which is unable to manage its own affairs.
"It is submitted that this is a fit case for a forensic audit of accounts for the last 10 years at least to examine misrepresentation of facts to lenders or diversion of funds to delay or avoid payment of government dues," the letter claimed. Vi has reported narrowing of its consolidated loss to Rs 7,022.8 crore for the quarter ended March 2021, mainly on account of cost optimisation. The company had posted a loss of Rs 11,643.5 crore in the same period a year ago.
Total income declined by about 19 percent to Rs 9,647.8 crore from Rs 11,920.4 crore in the corresponding quarter of 2019-20. For the year ended March 31, 2021, Vi loss narrowed to Rs 44,233.1 crore from Rs 73,878.1 crore at the end of 2019-20. The gross debt (excluding lease liabilities) on VI as of March 31, 2021 was Rs 1,80,310 crore, comprising of deferred spectrum payment obligations of Rs 96,270 crore and AGR (adjusted gross revenue) liability of Rs 60,960 crore that is due to the government and debt from banks and financial institutions of Rs 23,080 crore.
