Vodafone Idea (Vi) will most probably clear its outstanding dues for Q4 of FY21 after being called out by the Department of Telecommunications (DoT) for non-payment of the license fee for seven circles, including Bihar, Gujarat, Jammu & Kashmir, Kerala, Maharashtra, Uttar Pradesh (East) and Orissa.
According to an ET Telecom Report, partial payment has been made to the DoT, and the remaining amount will follow by next week.
What Caused DoT to Issue a Show-Cause Notice?
The payment was due on March 25, according to the show-cause notice that was drawn by the Department of Telecommunications (DoT) on April 7. DoT has been generous enough to seek out the information as to why the action shouldn't be taken against the cash-strapped Vi. In contrast, the DoT could have easily invoked telco's bank guarantees or, even worse, cancel its license for disobeying licensing conditions.
Vi was provided with an extension until April 15 to make the payment. It is quite evident that things are not looking great for Vi due to its weak financials. Vi has been unable to increase its tariffs due to the tough competition that it is facing. The tariff increase could have strengthened its finances. Amidst the lockdown, the company will be forced to increase the tariffs, which might lead the subscriber count to fall rapidly.
Vi, however, still has the chance of explaining for the delay in payments, which needs to be done by April 12. The Unified License Agreement states that the payment needs to be made in four quarterly instalments. Last year for the same quarter, the telecom operator had paid Rs 1,367 crores towards license fees and spectrum usage charges (SUC). For the first quarter (April-June), the telco paid Rs 1,200 crores.
The telco needs to strengthen its 4G operations sizeably in its 16 priority circles to survive and strive to compete against the stronger telcos, Bharti Airtel and Reliance Jio. Further, Vi needs to clear its Adjusted Gross Revenue (AGR) of Rs 50,400 crore.
Vodafone Idea (Vi) has already lost 2.3 million wireless subscribers in January, while giants like Bharti Airtel and Reliance Jio has gained 5.9 million and 2 million users, respectively. It can be summarised that the scenario is looking tough for Vi, but it will be intriguing to see what Vi does to stay afloat.