Vodafone Idea Not Looking to Give Up Equity Against Dues

Vodafone and Idea announced a merger to create a telecom behemoth with nearly 430 million subscribers. However, it witnessed a significant drop in the number of subscribers since then.

Highlights

  • Vodafone Idea will not use the equity to pay principal and interest to the government.
  • The option of paying dues as equity to the government will defeat the entire purpose of ownership.
  • The merged debt-laden telco wants to put structural changes back in place in order to take advantage of the relief package.

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Vodafone Idea Not Looking to Give Up Equity Against Dues

Vodafone Idea (Vi), the merged entity between Vodafone and Idea, is not preferring to use the equity to pay both the principal and interest that it has to pay the government towards AGR (adjusted gross revenue) dues and spectrum fees. This has been revealed by people with direct knowledge of the matter at the Aditya Birla Group, claims a report by MoneyControl. The option of paying dues as equity to the government will defeat the entire purpose of ownership, claims the report citing people who wish to be anonymous.

The merged debt-laden telco wants to put structural changes back in place in order to take advantage of the recently approved telecom relief package by the government. As per the government’s approval, there will be a moratorium of four years on AGR dues and spectrum fees. This will come into effect from October 1, 2021, claims the report.

Also, it is tipped that a multi-pronged strategy is in the works to capture the telco’s loss of market share as well as to improve its health financially with the boost granted to cash flows, they added. They stated that it is a relief from the government dues to the telecom operators but not from the intense competition faced in the telecom sector. The structural changes are being contemplated by Vi include improvements in management, upgrading from 2G to 4G and sharpening its competitive edge.

Vodafone Idea Doesn’t Want To Give Up

Back in 2017, Vodafone and Idea announced a merger to create a telecom behemoth with nearly 430 million subscribers. However, it witnessed a significant drop in the number of subscribers since then. It was 255 million in the Q1 of this fiscal year and the average revenue per user (ARPU) plunged to Rs 104 in the same quarter. Notably, it was Rs 121 in Q3 of the last fiscal year.

The sources cited above claim that Vi needs an ARPU of nearly Rs 150 to generate sufficient revenue and sustain in the industry. In the tough tariff environment, it will not be able to generate revenue without upgrading its network from 2G to 4G as this move will add a premium to it and help increase its ARPU. However, this is laced with challenges as the network upgrade requires a capital expenditure on infrastructure.

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Chakri is a go-to guy for your next smartphone recommendation. Back in his engineering days, he used to play with smartphones by installing custom ROMs and that passion got him into the tech industry. He still goes nuts about a smartphone knocking his door for review. Currently managing everything at Telecom Talk, Chakri is trying to master PUBG Mobile in his free time.

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