Vodafone Idea survival in question as Birlas won’t infuse fresh equity into telecom JV
New Delhi: Trouble seems to be mounting for Vodafone Idea as the Aditya Birla Group has reportedly decided not to pump any fresh capital into its telecom joint venture with British telco major Vodafone Group, and let it opt for insolvency if the Department of Telecommunications (DoT) does not provide any substantial relaxation, including on the company’s adjusted gross revenue (AGR)-based dues, which could be more than Rs 39,000 crore. On Thursday, Vodafone Idea dipped 21.62 per cent to Rs 2.90 — its record low — on the BSE.
It is worth noting that the October 24 apex court’s judgment gave a huge jolt to Vodafone Idea and Bharti Airtel, allowing the Centre to recover AGR-based dues of about Rs 92,000 crore from these telecom service providers. More importantly, the government has reportedly begun the initial process of claiming its dues from these telecom companies.
“The telecom business seems to be making money for everyone else except the players. It is unviable and unsustainable and will only drag down the group’s profitability. We need to rethink our capital allocation better in a difficult business environment,” a leading financial daily quoted an unnamed senior group executive as saying.
A group official, however, clarified that the Indian entity is aligned with the views of Vodafone Group CEO Nick Read. The Vodafone chief warned that the company could pull out of India because of the “critical” situation. “If you’re not a going concern, you’re moving into a liquidation scenario — can’t get any clearer than that,” he had said.
Read is learnt to have written back to the government, clarifying that the telco will remain invested and blamed the media for distorting his comments. He also thanked the government for setting up a Committee of Secretaries (CoS) to look into the matter and suggest ways to mitigate financial stress in the sector.
The incumbent telecom players such as Vodafone India and telecom czar Sunil Mittal-controlled Bharti Airtel want the CoS to take a quick decision on giving the much-needed relief on the AGR-related dues.
The crisis-hit telecom company has dues of over Rs 99,000 crore, and it reported losses of around Rs 5,000 crore and revenues of Rs 11,300 crore in the quarter ended June 2019. The beleaguered telco is slated to announce its financial results for Q2FY20 on Thursday (November 14).
Vodafone Idea in the last one month held talks with six investment banks to raise funds from the overseas or domestic market, bankers familiar with the matter told the publication,
Aditya Birla Group chairman Kumar Mangalam Birla held several discussions with senior government officials regarding a relief package that would include AGR dues. Plus, Read also met several senior government officials during his last visit to India, and sought respite from high taxes and spectrum dues.
“Assuming no near-term respite in the form of supportive measures, the odds are against the possibility of Vodafone Idea’s survival. It looks increasingly plausible to believe that in absence of any regulatory or policy-driven relief, the Indian telecom space may get reduced to a two private player market,” the publication mentioned citing a recent report of SBICap Securities.
