Vodafone Idea collapse: 5 developments since company posted Rs 50,921 cr loss

As fears mount over Vodafone Idea’s survival in India, the company’s senior management has reportedly told lenders that if it doesn’t get urgent relief from the government, repaying the lenders in a timely manner may not be possible.

Vodafone Idea posted a huge net loss of Rs 50,921 crore for the last quarter, the biggest quarterly loss in India’s corporate history. This comes after the Supreme Court judgment on the Adjusted Gross Revenue (AGR) matter, in which a number of telecom companies were implicated. The company noted that the SC order has resulted in liabilities amounting to Rs 44,150 crore for license fees and spectrum charges.

“It is to be noted that our ability to continue as a going concern is dependent on obtaining the reliefs from the government,” the company said in a statement when it published its financial results.

Both Vodafone Idea and Airtel posted huge losses after the Department of Telecommunications notified telecom companies on Thursday that they must pay their AGR dues within three months. Shares of Vodafone India crashed by 21% following this. 

The company’s global CEO Nick Read had earlier said that Vodafone’s joint venture in India may soon 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.

Here are five developments in the story since:

• The telecom giant is looking to sell its data centres and its optic fibre network to raise funds, managing director Ravinder Takkar reportedly said in an analyst call on Friday.
• Vodafone Idea noted that it is in the process of filing a review petition on the AGR judgment in the Supreme Court.
• The company has also appealed to the government to ease pressure on the collection of prior dues as well as to reduce licensing fees and spectrum charges. Vodafone India has also applied for urgent relief from the government to help avert a collapse.
  “Banks with high exposure to Vodafone Idea met (the management) this week, in which the latter expressed their inability to pay dues if the department of telecommunications (DoT) decides to invoke bank guarantees and not extend any relief,” a senior official told the Economic Times on the condition of anonymity. “They have told us that the ball is now in the government’s court.”
• The Economic Times reported that Vodafone may only have a few months before its auditors step in to take a call on the company’s status, and determine whether intangible assets, such as goodwill, can be written off in its financial statement. While fair market value captures only physical assets which can be liquidated, it leaves intangibles useless. The company has reportedly told its auditors that it expects some cash flow in the coming months as well as clarity around royalty payments to the UK parent as well.
• Brokerage firms told PTI that they believe that even if the government does provide relief for payments, it will not be in conflict with the Supreme Court.
  SBICap Securities told the news agency that while the company requires funds, raising equity or debt is tricky. “The ability to invest in networks, which has been the single largest reason for the company losing subscribers, is further likely to take a back seat and subscriber losses may continue in our view,” it said.