Ailing Indian telco Vodafone Idea to opt for spectrum payment moratorium

Vodafone Idea opt
Image by Dilok | Bigstockphoto

Vodafone Idea is exercising the choice to opt for the four-year spectrum payment moratorium starting from October 2021 to September 2025 and has already informed the Department of Telecommunications (DoT). With this, it has become the first telecom operator to accept the offer of a deferred payment option, which the Indian government is providing under the telecom relief package.

The telecom operator will soon decide whether it will opt for the moratorium on adjusted gross revenue (AGR) payment and the option to convert interest on deferred payments into equity. It has till October 29 to confirm the AGR payment moratorium.

“…we wish to inform you that the Board of Directors of the Company has approved the exercise of the option of deferment of the Company’s spectrum auction instalments for a period of 4 years (October 2021 to September 2025) in accordance with paragraph 2 of the notification dated 14 October 2021 issued by the Department of Telecommunications (DoT) to the Company,” Vodafone Idea’s company secretary, Pankaj Kapdeo, informed the stock exchanges on Wednesday.

“The other options offered in the said notification by DoT will be considered by the Board of Directors of the Company within the stipulated time frame,” Vodafone Idea added.

The telecom department had last week sent letters to Bharti Airtel, Reliance Jio and Vodafone Idea regarding the moratorium options. It gave all three telcos time till October 29 to respond on the matter.

Bharti Airtel and Reliance Jio have not yet opted for a moratorium.

Last month, India announced a 4-year moratorium for telecom operators, deferring adjusted gross revenue (AGR) and spectrum payments, reduced BGs or bank guarantees and the option to convert statutory dues to government equity. It also abolished the spectrum usage charges (SUC) from future spectrum auctions besides allowing telcos to surrender unused spectrum to the government.

The relief package is aimed at improving the cash-flow situation for the telecom sector and also addressed industry concerns over a possible-duopoly of Reliance Jio and Bharti Airtel.

Third ranked Vodafone Idea, which is struggling to survive due to the burden of statutory dues, including AGR payments, will now be able to save around Rs 25,000 crore ($3.38 billion) in its annual cash flow if it also opts for moratorium for both AGR and spectrum dues.

The telecom operator has a debt of Rs 1.9 lakh crore ($25.68 billion), of which around Rs 1.6 lakh crore ($21.62 billion) are statutory dues.

As part of the relief package, India has also devised a mechanism for telecom operators to convert the dues arising from interest accrued during the moratorium period into equity to be owned by the Indian government. Indian telecom operators have 90 days to exercise their option of equity conversion.

Vodafone Idea Ltd (VIL) Managing Director and CEO Ravinder Takkar, however, recently clarified that the Indian government has “no interest” in acquiring any telecom operator in the country and already conveyed to all stakeholders that the industry needs to have at least three private service providers.

As per reports, the cash-strapped telecom operator has also sought clarity from the DoT on its bank guarantees worth Rs 23,000-25,000 ($3.11-$3.38 billion) crore related to spectrum payments. The return of bank guarantees will allow Vodafone Idea to improve its relationship with its lenders.

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