Vodafone Idea Subscriber, Employee Base to Bear Effects of Low ARPU: ICRA

The government’s relief package for the sector might allows telcos to defer the spectrum payments beyond FY22. Further, even a slight drop in the percentage of levies would result in the sector saving thousands of crores which can be reinvested into products and services or paying off the dues.

Highlights

  • Vodafone Idea will benefit a lot from the relief measures that the government might come out with in the short-term
  • As of June 30, 2021, Vodafone Idea owed Rs 23,400 crores to lenders and Rs 1,68,190 crores to the Government of India (GoI)
  • The debt further limits Vodafone Idea’s capacity of reinvesting into its networks which is what it needs to do to come out of its desperate situation

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Vodafone Idea

Vodafone Idea (Vi) is the most affected telecom operator because of the current industry norms and regulations. The sector is financially stressed and at the bottom of the table is Vodafone Idea burdened with adjusted gross revenue (AGR) dues, other statutory dues and thousands of crores worth of loans from lenders. Vi needs the industry to regain momentum in terms of overall revenues as soon as possible. ICRA, an independent credit rating agency, has said that because of the largely stagnant 4G user base and the pressure on the average revenue per user (ARPU) levels, Vodafone Idea’s profit generation has been muted.

Vodafone Idea Will Benefit Most from Moratorium on Spectrum Dues

Ankit Jain, Sector Head and Assistant Vice President, ICRA, said, Vodafone Idea will benefit a lot from the relief measures that the government might come out with in the short term. According to Jain, the biggest form of relief measure for the telco would be getting a moratorium on spectrum dues beyond FY22.

The government’s relief package for the sector might allow telcos to defer the spectrum payments beyond FY22. Further, even a slight drop in the percentage of levies would result in the sector saving thousands of crores which can be reinvested into products and services or paying off the dues.

As of June 30, 2021, Vodafone Idea owed Rs 23,400 crores to lenders and Rs 1,68,190 crores to the Government of India (GoI) in the form of the spectrum and AGR dues. The amount of debt with no profits in the books will have a serious impact on the employee base and the subscriber base of the telco.

The debt further limits Vodafone Idea’s capacity of reinvesting into its networks which is what it needs to do to come out of its desperate situation. The relief package is what Vodafone Idea will be looking forward to in the short term.

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