Previously, we were aware that Vodafone Idea (Vi) would clear its dues within this week, but now the D-day is announced to be April 15. Not only will Vi clear outstanding dues of Q4 of the previous FY21 by April 15, but it will also present an appropriate cause to the Department of Telecommunications (DoT) show-cause notice.
What Caused DoT to Show-Cause Vi And Vi's Take From It?
According to an ET's report, The DoT show-caused Vi for the non-payment of license fees for Q4 of FY21 for seven circles, including- Bihar, Gujrat, Jammu & Kashmir, Kerala, Maharashtra, UP-East and Odisha, along with the long-distance licenses.
Vodafone Idea (Vi) recently said in an exchange filing that generally, the payment is made on the 15th of the month following the quarter-end. Therefore, Vi will make its payment towards the license fee with interest by April 15. It will also present an appropriate explanation on the show-cause notice explaining why the payment was not made timely. Besides the LF dues, Vi also has to pay Rs 50,400 crore towards Adjusted Gross Revenue (AGR) to the government.
DoT could have invoked the telco's bank guarantees, or worse, it could have even cancelled its license for not adhering to license conditions. The coming months will be challenging for already struggling Vi to raise funds. It was likely to secure $2-2.5 billion (Rs 14,500-18,100 crore) via convertible instruments from an Oak Hill-led consortium that has gone sour. The telco has also reached private equity firms like KKR, but it hasn't been of much help either.
One way of raising revenue could have been raising tariffs, but its tariffs are already costlier than Jio and Airtel. Increasing tariffs now would also lead to a higher subscriber churn rate which in turn will lead to Vi losing the Average Revenue Per User (ARPU), that it desperately needs.
To bridge the gap between the performance of Vi and other giant telcos, Vi sizeably has to strengthen its 4G connection, for which it needs cash. The loss-making telco Vi has lost about 2 million users in January while Airtel and Jio gained 5.9 million and 2 million users, respectively. All in all, it can be concluded that the telco cannot afford to lose any more users; therefore, it needs to secure funding to strengthen its 4G connection and thereby retain and gain new users.