Vodafone Idea Approaches DoT Seeking Another Two Years for Spectrum Payment

By January 20th, 2019 AT 7:46 PM

Telecom operator Vodafone Idea has sought a two-year moratorium on annual spectrum payment of about Rs 10,000 crore, citing high debt levels and stress on the balance sheet. “The Department of Telecom has received representation from Vodafone Idea for 2-years additional moratorium on spectrum payment that they procured in the auction. The request is being examined and it has to be scrutinised and considered by other departments/ministries in the government before taking any decision,” a senior government official told PTI.

vodafone-idea-dot-spectrum-charges

The amount to be paid by Vodafone Idea is estimated to be around Rs 10,000 core this year. When contacted, Vodafone Idea spokesperson said: “The telecom industry is critical to fulfilling the Digital aspirations of 1.3 billion Indians. Hence, it is important for it to be financially robust with multiple operators that can offer choice to citizens, ensure healthy competition and that national assets like spectrum are valued correctly. However, India’s telecom industry is currently suffering considerable financial stress and this has been extensively reported in the media”.

Vodafone and Idea have participated in five auctions that were held in 2010, 2012, 2014, 2015 and 2016 before merging their mobile business. In five auctions, Vodafone alone had acquired spectrum worth Rs 79,343 crore, which is highest in terms of value compared to bids made by any other operator. Idea too had purchased spectrum worth Rs 63,597 crore in those auctions.

After completion of the merger on August 31, 2018, the spectrum payment liability is now on Vodafone Idea. Vodafone spokesperson said in November and December 2018, the industry wrote to the government seeking urgent measures to improve its cash flow, reduce costs and regain financial strength to ensure the long-term health of the sector.

“One specific request was for the government to defer some spectrum payment obligations. Vodafone Idea supports these industry requests,” the spokesperson said.

The government in March last year enhanced a number of annual instalments for spectrum payment from 10 to 16 years to provide relief to the sector, which is reeling under the debt of around 7.8 lakh crore.

Telecom operators body Cellular Operators Association of India (COAI) in November again approached DoT secretary Aruna Sundararajan to seek an additional 2-year moratorium on payment of instalments of spectrum won in auction and interest charges imposed on instalments.

READ:  Vodafone Rewards Programme Introduced to Offer Extra Data, Calling Benefits on Prepaid Recharges

A similar request was submitted by industry chamber Assocham in December. Industry bodies said that the sector had lost 42% revenue from sales of telecom services on a quarterly basis between April-June 2016 and July-September 2018. They said the debt level on four mobile operators is at around Rs 5 lakh crore, with 60% of the liability is from spectrum payment obligations.

They mentioned that spectrum prices discovered in 2014 to 2016 were at “world’s highest spectrum auction prices”, which were not the real value of the radio waves.

According to other sources in the government, while demanding relief, industry players have said that it is a tough time for sustainability of business in the present situation and is a serious cause of concern as it has potential to expose Indian banks and financial institutions to a high level of bad loans.

Vodafone Idea spokesperson said that the company remains optimistic about its future and the long-term outlook for the market. “Our integration programme is ahead of plan and we expect to accrue synergy benefits two years ahead of our original expectations. Furthermore, Vodafone Idea has announced its intention to raise up to Rs 250 billion of equity capital and both promoter shareholders have indicated that they would contribute up to Rs 182 billion,” the spokesperson said.

In addition, Vodafone Idea is progressing the sale of non-core tower and fibre assets to further increase financial flexibility, the spokesperson added. “All these capital raising initiatives will make the company stronger and any questions about its (Vodafone Idea) survival in the absence of the relief that has been sought from the government by the industry are totally unfounded and malicious,” the spokesperson said.

Meanwhile, Vodafone Idea Ltd in a regulatory filing said the board meeting would be held on January 23 to consider and approve a proposal for raising funds, including through rights issue, qualified institutions placement, preferential allotment or any other mode.

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Thamilan daaPreacherNTRsaketKrrish Recent comment authors
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Preacher
Preacher

They should be given time.
They are not deserting their customers (like Reliance SMART, Aircel, Telenor, etc.)
They are not running away from India (like …………. everyone knows the list of Companies)
All they are asking is time to clear their dues.
All the best to Vodafone Idea.

Thamilan daa
Thamilan daa

Given time?. What about the vodafone tax scandal in India?. Answer this.

Preacher
Preacher

The Government should write off the dues of the Telecom Service Providers in view of the onslaught by Jio.
Jio should compensate for destroying a healthy industry from which the Government was benefiting all these years.

saket
saket

You mean govt is benifitting with older telco ok.

But jio made internet available to every indian, which somewhat boost Economy and GDP with initiative like DIGITAL INDIA is bad???

saket
saket

I am not in favour that DOT should Accept VIL. Instead VIL should pay with some TERMS.

NTR
NTR

Preacher

Are you from MARS .

Use some common sense please

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