Vodafone Idea was the facing massive financial burden after the supreme court directed telcos to clear their AGR dues. Since the threat of Covid-19 was increasing, Vodafone Idea was facing distress as the government of India announced the lockdown period to combat the deadly Virus. Honouring the terms of contingent liability mechanism Vodafone Group transferred payment of $200 Million to Vodafone Idea for clearing off financial liabilities and maintain liquidity position of the firm, as reported by ET Telecom.
Vodafone Group released the whooping amount to Vodafone Idea under the contingent liability mechanism under which Vodafone Group must make payments to Vodafone Idea in the case where payments made by Vodafone Idea exceeds the payment made by Idea cellular. The CLM clause was made at the time of the merger between Vodafone and Idea in which payment was due in September 2020.
Vodafone Idea is already facing massive financial burden as the telco is offering benefits to its prepaid subscribers amidst the lockdown period. As the subscriber growth is slowed, Vodafone Idea was facing trouble to maintain the liquidity position of the company. In difficult times, payments by Vodafone Group will aid the telecom operator to manage the cash position and provide prepaid benefits and services to subscribers in the second phase of the lockdown period. Vodafone Idea is already doing its part to ensure seamless connectivity in the lockdown period. After the government extended the lockdown period until May 03, 2020, Vodafone Idea increased the validity of free incoming facility until May 03, 2020, in nearly 90 million subscribers account. Also, the payment made by Vodafone Group will aid the 300 million customers of Vodafone Idea.
Vodafone Idea recently cleared Rs 1,367 towards Spectrum Usage Charge and license fees for January to March Quarter. Vodafone Idea has to pay annual spectrum of worth 1.7 billion dollars which will be increased to 2 billion dollars after two years because of the interest incurred. Since the government did not entertain the payment date extension request, Vodafone Idea cleared the Spectrum Usage and License fees.