Vodafone Idea’s precarious position in the Indian telecom industry continues, with Vodafone CEO Nick Read reiterating that the situation is critical. He made the comment during Vodafone’s Q3 earnings call for FY20.
Read stated that the telecom industry in the country has asked the government to take action so that the market doesn’t become a duopoly and “to support the continuation of a three plus one player market.” These players would be Bharti Airtel, Reliance Jio and Vodafone Idea, along with BSNL.
“Specifically, we have requested an immediate two-year moratorium on spectrum payments, a lowering of license fees and taxes, the waiving of interest and penalties on the AGR case and the ability to make the payment on the principal over 10 years with a two-year moratorium,” Read said.
Vodafone Idea’s dues are estimated to be Rs 53,038.6 crore, a large chunk of which is interest and penalties.
The AGR issue originated in 1999, when telecom operators migrated to a new system offered by the government under which they agreed to share a certain percentage of revenue with the government. Operators argued that AGR should comprise only revenue from telecom services, but the DoT insisted that it should include all revenue earned by an operator. Accounting for this, Vodafone Idea incurred the largest quarterly loss in India’s corporate history.
Since then, the Supreme Court has rejected the review plea filed by telecom operators. They have now approached the court to sit down with the Department of Telecommunications and figure out a payment plan.
Read stated that they are waiting for the outcome of this modification application. “However, these delays combined with the protracted process to gain approval for the merger of Indus and Bharti Infratel are putting Vodafone Idea under incredible strain,” he said.
Indus Towers is a joint venture between Bharti Infratel, Vodafone Group and Vodafone Idea, with the former two holding 42% each. Vodafone Idea has 11.15% and the remaining 4.85% is with private equity firm, Providence. The merger was proposed to create a company with over 1,63,000 towers. Bharti Airtel owns a majority stake of 53.51% in Bharti Infratel. The crucial merger is expected to help loss-making telecom companies Bharti Airtel and Vodafone Idea sell stake to raise funds.
Read had earlier said that Vodafone’s joint venture in India with Idea may have to be liquidated, citing “unsupportive regulation” and “excessive taxes” as reasons. He noted that the company’s future was in peril unless the Indian government provided relief on mobile spectrum fees. In Novermber 2019 the government gave a two-year moratorium on spectrum fees.
Kumar Mangalam Birla, the chairman of Vodafone Idea had earlier said that in the absence of relief from the government, the company will close. "It does not make sense to put good money after bad. That would be the end of the story for us. We will shut shop,” he had said.
During Vodafone’s Q3 Vodafone earnings call, said that the company hasn’t changed its position with regard to not infusing any more capital into the joint venture. “We will not be injecting additional new capital into India,” Read said.
Bharti Airtel CEO Gopal Vittal said on Wednesday that he wished better days for rival Vodafone Idea, saying the company's existence is critical for India to remain a three-private player market that could bring investments, prevent job losses and restore the reputation of the struggling industry.
“I think Vodafone Idea will remain and I wish it thrives... it is important that India remains a three-player market as that is good from all perspectives, (as in), investments, jobs and reputation," Vittal said.
With IANS inputs