Kapania, Vodafone Idea Chairman says India knows competition is vital

Kapania Vodafone Idea
Image by Elnur | Bigstockphoto

Vodafone Idea’s newly appointed chairman Himanshu Kapania said that the telecom operator is going through a “difficult phase” but added that the Indian government recognizes the criticality of the sector and the importance of retaining healthy competition amongst private sector operators.

Notably, the Indian Cabinet is likely to consider a relief package on Wednesday for the Indian telecom sector, covering all types of levies, tenure of spectrum lease, and easier payment terms for statutory dues. Any move which leads to a reduction in AGR dues or even the annual AGR instalments will come as relief for loss-making Vodafone Idea.

“As the industry continues to remain under unsustainable financial duress, your Company [Vodafone Idea] is hopeful that the government will provide the necessary support to address all structural issues faced by the sector,” Kapania informed shareholders in the annual report.

Through the course of FY21, Kapania said that the operating environment continued to remain challenging due to unsustainable pricing and hyper competition which were further aggravated by the COVID-19 pandemic. 

“While the operating challenges remain, increasing digital penetration which has got a further boost during the pandemic, remains a massive opportunity for the telecom industry especially when the pricing revives in future,” he said.

Kapania reiterated that Vodafone Idea is “very well positioned to benefit from the trend of increasing content consumption, especially through video. He said that social media usage is driving strong demand for high-speed internet”. 

Vodafone Idea, he said, has a strong spectrum portfolio and has made large network investments in the form of network sites and optical fiber along with a wide distribution reach.

Vodafone Idea, he said, has a history of providing 25 years of mobile services to the country and is hopeful that the government will support its efforts to generate reasonable returns on their massive investments. “Therefore, while the company awaits the final Government’s decision, it will continue to remain focused on providing quality service to the customers and sustain intensity in the market,” Kapania said.

The Supreme Court on July 23, 2021 rejected the modification application filed by Vodafone Idea and other operators, asking to allow DoT to correct manifest/clerical/arithmetic errors in the computation of AGR demands. Subsequently, on August 10, 2021, the Company filed a review petition against the order dated July 23, 2021, which is pending an outcome.

Vodafone Idea, he said, is disappointed by the verdict and will take further legal recourse as appropriate. “Your Company believes the government recognizes the criticality of the sector and the importance of retaining healthy competition amongst private sector operators,” he added.

Kapania said that the telco will continue to focus on execution of its stated strategy, adding that it has made significant 4G investments and continues to expand its coverage and capacity further. “All the ongoing strategic initiatives will ensure that your Company will continue to provide the best of customer experience to retail and enterprise customers and help in creating an agile and future-fit organization.”

The telecom operator had 255.40 million subscribers in the country of which 121.4 million were mobile broadband (3G and 4G) subscribers in June 2021. It recently said that if it goes bankrupt, then its subscribers will be left “high and dry.”

Around 134 million 2G subscribers of Vodafone Idea would be the most affected if the telecom operator folds due to high debt and cash crunch for daily operations.

Vodafone Idea’s June quarter losses widened sequentially to Rs 7,312.9 crore ($988.4 million) on a 4.7% fall in revenue of Rs 9,152.3 crore ($1.24 billion), which was the lowest in more than two years. 

Goldman Sachs estimates that the telco could face a $3.2 billion cash shortfall until April ’22 at its current EBITDA run-rate. It has stiff upcoming payment commitments towards existing debt repayments, spectrum payment installment annual AGR payments.

Related article:

Merge Vodafone Idea, BSNL to avoid another bankruptcy: Deutsche Bank

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