Vodafone Idea Ltd (VIL) Managing Director and CEO Ravinder Takkar said 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.
“I have had many many interactions across various parts of the government leading up to this announcement (telecom reforms). In all my conversations, it is absolutely clear that the government has no interest in owning or acquiring or running any other telecom company,” Takkar was quoted as saying by India’s news wire service PTI.
The government, he said, has “absolutely made it clear that they want three private players to remain. They want us to compete in the market. They want us to operate in a competitive manner.”
Earlier this month, India had announced a telecom relief package, which includes a 4-year moratorium on payment of statutory dues by telecom companies and 100% FDI through the automatic route, among others, to improve the cash flow situation in the telecom sector.
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.
Takkar said that Vodafone Idea intends to pay back to the government but added that it is open to converting the interest on deferred statutory dues into government equity.
“…our business plan will reflect that part. But certainly having that option where that could be converted into equity is a bold move and in a way ensures that if the industry is not fixed then the government will continue to support the industry for a longer period of time as long as it needs to be,” Takkar said, adding that the 4-year payment moratorium will ensure that the loss-making telco survives and is competitive.
Experts, however, said that in the worst-case scenario, if Vodafone Idea opts to convert its interest accrued during the moratorium period, it would significantly dilute the existing shareholders’ stake, and the government may end up with it becoming the largest shareholder of the telco.
It is noteworthy that state-run telcos BSNL and MTNL are yet to post profit after a relief package of around Rs 69,000 crore was granted in October 2019, which means that the Indian government might not be interested in taking over Vodafone Idea.
Vodafone Idea is awaiting total clarity on the relief package and will start discussions with investors to raise funds accordingly. The telco’s board had previously given its nod to raise Rs 25,000 crore ($3.42 billion).
“The Cabinet has announced its decisions and it gets converted into specific guidelines, they should be coming in a few days. That will allow us to kickstart the fundraising process all over again. We expect a fairly quick turnaround time given the fact that the issues that the investors were bringing up have been addressed,” Takkar separately told the Economic Times.
Takkar said that Vodafone Idea’s promoters, Vodafone Plc and Aditya Birla Group, will have an opportunity to participate in the upcoming fundraising round. “Promoters have invested a lot in this business….now whether they choose to do so or don’t or how much they participate is a choice they will make I feel confident about the future growth of this company.”
As per analysts, the telecom operator will need to raise $1 billion next 6-9 months to repay its non-spectrum debt and invest in its networks and operations,
Credit Suisse said that despite the moratorium and equity conversion of interest during the period, the telecom operator will need an ARPU (Average Revenue Per User) of $3.25 by financial year 2026 to meet $4.52 billion of annual spectrum payments and AGR dues which will need to be repaid over the remaining tenure. The telecom operator reported an ARPU of $1.14 in the first quarter ended June 30, 2021, compared to $1.98 by Bharti Airtel and $1.87 by Reliance Jio.
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